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The New Old Guard 

It’s like calling back Fergie to manage Scotland. Ok it’s not, but I figured we need some analogy that references Scotland + football after last night’s heroics from Steve Clarke’s men. UBS shares rallied 2% to above 18CHF in early trade as the bank named ex-boss Sergio Ermotti as new CEO, taking over from Ralph Hamers on April 5th. The Swiss bank said it took the decision “in light of the new challenges and priorities facing UBS after the announcement of the acquisition of Credit Suisse”. Investors seem to be saying they like the prospect of the old hand on the tiller. UBS faces no small challenge in digesting CS. Hamers can’t feel too good about being strong-armed into buying a mare and then not even getting to ride her. The perception – rightly or wrongly – will be that Hamers was not considered right to lead the new behemoth through what’s going to be a tricky period of consolidation, integration and no doubt, litigation.  

  

European Banks and US Tech at Odds 

European indices made modest gains early Wednesday as the major bourses continue to drift up following last week’s volatility. The FTSE 100 ticked up to 7,511, having hit its highest since Thursday yesterday at 7,525. We’re seeing similar upwards drifts for the DAX and CAC, too, as investors put banking stresses behind them.  

It comes after a more circumspect day on Wall Street left the major indices down slightly for the day as rising bond yields put pressure on tech/growth which had been doing most of the lifting as financials/value have retreated. The Nasdaq fell 0.45% to 11,716, whilst the S&P 500 declined a more modest 0.16% to 3,971, both above their 200-day moving averages for now. The US 2yr yield rose above 4%. Rising yields = good for Europe banks, bad for US tech. But we are also seeing a bid for European tech this morning as Infineon lifts guidance, sending European chipmakers firmer – read across for NVDA, AMD etc.   

  

US Banks Stumble 

Meanwhile US bank stocks slipped as regulators said they favour tougher regulations on the sector.A US Senate hearing on the collapse of SVB is likely to going to lead to tighter restrictions. You can say it’s just about the Fed raising rates really fast after a really period of ZIRP, and inevitably some banks would be hit. But you can bet that reflex of the regulators it to do more regulation. “I anticipate the need to strengthen capital and liquidity standards” Federal Reserve vice chair for supervision Michael Barr said in respect to banks with assets of more than $100bn.  

  

Yen Survives Stronger Comments 

Some jawboning coming out of the Bank of Japan ahead of new governor Ueda’s first meeting. New deputy governor Shinichi Uchida said: "If various conditions fall in place, some sort of change to yield curve control may become necessary. If conditions turn positive, (a tweak) will undoubtedly become a possibility.” As stated before, normalisation will come - yield curve control cannot last much longer and the exit could be painful for global bond markets. Despite the comments the yen was offered overnight and USDJPY has jumped to its highest in a week at a whisker below 132. Tokyo core CPI is due Friday.  

 

Down Under Down Under 

Australia’s dollar also traded weaker overnight as Australian inflation slowed to its lowest in eight months at 6.8% vs expected 7.1% and 7.4% previously. This underlines the case for the RBA to pause its hiking cycle. 

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