SVB situation causes uncertainty, but market remains relatively stable
13 March 2023
That was a stressful weekend for both sides of the market. Of course, SVB was dominating the headlines but the situation is far from obvious as the consequences are still unknown. Many bears celebrated and hoped for a Black Monday type of trading in the same time being scared of any intervention or positive news from FED, FDIC, SEC or other related body. On the other hand, buyers were obviously scared of the collapse of the SVB but in the same time hoping that it will not be contagious and will not start the domino style tragedy on the market.
Many people are currently bringing up the collapse of the Lehman Brothers and the great financial crisis from the 2008. As for now, this is just a catchy phrase meant to attract more viewers rather than a legitimate comparison. I guess that as for now, traders do think the same as the indices started a new week with a rise. SP500 and Dow Jones are currently above the levels seen on Friday and even above the close from Thursday. Calm before the storm?
The only instrument, which is currently visibly losing is the American Dollar. The reason for that is simple. Traders are no longer expecting a rise of the rates from FED in the nearest future. Rising rates would add an additional stress to the banking sector and this will be probably avoided. In overall, currency market seems not to care about the situation with the SVB. Three major currencies are currently on the red side of the market and all of them are safe havens: USD, CHF and JPY. The risk mode on the forex market is ON.
There is one instrument, which is benefiting from the uncertainty and the weaker Dollar. Yes, it is gold. The price of this precious metal rose spectacularly in the past three days, jumping from 1813 to almost 1900 USD/oz today. Other commodities cannot copy this move. They are up but really modestly. Oil is trading 0.5% higher but the long-term sentiment remains negative.
Today’s calendar is empty. We will for sure keep our eyes on the US to see what is happening with the deposits and withdrawals from the Silicon Valley Bank. As for now, all the fears seem slightly exaggerated.