Stock Market Today
It appears that this week will bring some concerning news for the markets as senior Credit Suisse executives spent their weekend assuring senior and large clients that things are under control. The credit default spreads for Credit Suisse, and many other banks jumped enormously on Friday as panic started to sink in.
The weekend’s event of a rise in CDS and the action of senior bankers assuring their creditors echoed what happened back in 2007’s financial crisis or during the PIGS crisis. If the actual situation is as serious as it was back then, we are certainly going to a different kind of beast this week.
Earlier today, there has also been news that the Bank of England is closely monitoring the turbulence in Credit Suisse, and if the BOE is doing this, then it has some serious concerns about the bank. It is also important to mention that if the BOE is looking at the CDS situation closely, then surely it will be only a matter of time before we will begin to hear an echo of this message from other banks.
One thing that went under the radar when the Bank of England announced its intervention was how the BOE made its QE announcement. There’s no doubt traders and investors have been thinking about some reaction from the bank but not such a strong message during trading hours. The fact that the BOE announced its decision during market hours suggested that the BOE was trying to quench a much bigger fire. One of the elements that triggered the fire and made the BOE make such an announcement could be the potential threats from Credit Suisse. But the sad reality is that if there is something wrong with Credit Suisse, we have a significant issue as this is a gigantic institute. The domino effect will be unbearable for most central banks, especially pension funds.
Futures in the US and European markets are trading lower as traders continue to monitor the CDS of Credit Suisse and other European banks. The main focus apart from the CDS world will be the US NFP data which will be released on Friday, and the number will set the tone for the rest of the week.
Oil
In the energy markets, OPEC plus members will meet in person and discuss the supply cut issues face to face. The fact that this is not a virtual meeting anymore and partners wants to meet in person is an indication for traders and investors that the cartel is worried about the current price trend. The meeting is not about the potential half-a-million production cut. Reducing oil supply by that much may not do the job, and the cartel will have to devise a strategy that can support their desired price level, which is definitely above the $80 market.
Forex
In the forex market, the meltdown continues for the Japanese yen as the USD/JPY pair crossed above the 145 price mark earlier today. This shows that the BOJ will have t bring much heavier artillery to fight the mighty dollar, as the dollar index is currently crushing the yen.
Closer to home, the focus will remain on the Sterling, and many traders believe that the sell-off will continue for the currency. Many traders have started to hedge their bets once again as parity is no longer a wild dream.