This Week: Silicon Valley Bank fallout may continue lifting NQ100_m

Governments and central banks across major economies are scrambling to limit the knock-on effects from the rapid collapse of Silicon Valley Bank (SVB), a key financier of the tech and startup ecosystem around the world.

The ongoing saga surrounding SVB now hangs over market proceedings, in a week which should’ve been dominated by chatter surrounding the incoming US inflation data:

Tuesday, March 14

• AUD: Australia February business confidence; March consumer confidence
• GBP: UK January unemployment rate, February jobless claims
• USD: US February consumer price index (CPI)

 

Wednesday, March 15

• CNH: China February industrial production, retail sales, jobless rate
• JPY: Bank of Japan meeting minutes
• EUR: Eurozone January industrial production
• GBP: UK Chancellor presents Spring Budget
• USD: US February retail sales

 

Thursday, March 16

• NZD: New Zealand 4Q GDP
• AUD: Australia February unemployment, March inflation expectations
• EUR: ECB rate decision
• USD: US weekly jobless claims

 

Friday, March 17

• EUR: Eurozone February CPI (final)
• USD: US February industrial production, March consumer sentiment

 

Remember, markets are currently operating in a “bad news is good news” mode.

Hence, with policymakers stepping in to limit the damage of SVB’s collapse (as well as that of Silvergate, Signature Bank, and perhaps more to come), that is prompting markets to believe that the Fed has to pivot into supportive mode and ease up on its rate hikes.

At the time of writing, the Fed funds futures are only pricing in a 25-basis point hike by the Fed at its upcoming decision due March 22^nd.

Such expectations are significantly diluted from the 70% chance accorded last week for the larger 50-bps Fed rate hike at its March meeting.

Hence, no surprise that the NQ100_m (which is based of the benchmark Nasdaq 100 index) has bounced off its 200-day simple moving average (SMA) to surge higher.

READ MORE: (March 9) NQ100_m forms “golden cross”

Further signs this week that policymakers, especially the Fed, is struggling to limit the SVB fallout may in turn boost risk assets, including the NQ100_m.

 

However, amid the SVB saga, market focus will still be on the incoming US CPI data due Tuesday.

A higher-than-expected US inflation figure may revive bets for an aggressive Fed, provided such expectations can punch through the lingering fears over the extent of any SVB contagion.