Indices 

US stocks and indices reacted negatively to the releases of US interest rates and economic projections, however, on Friday, they closed positively compared to the previous week by over 1%. The highest gain was observed on US Nasdaq which gained 1.97%. Simultaneously, Bitcoin also gained heavily over the current escalates of the banking crisis. Some investors might argue that Bitcoin cannot be considered a safe haven, however, all evidence in the price behavior suggests the opposite. 

European stocks saw an overall increase despite a decline in the banking sector. The STOXX Europe 600 Index, measured in local currency, rose by 0.87%. In addition, major stock indices such as Germany’s DAX increased by 1.28%, while the UK’s FTSE 100 Index went up by 0.96%.

Forex

On Friday, the Dollar Index surpassed the 103.00 level, distancing itself from the seven-week low of 102.00 recorded in the previous session, as investors sought refuge in the US currency due to instability in the banking industry. Deutsche Bank’s announcement that it would redeem $1.5 billion in tier 2 notes set to mature in 2028, coupled with the highest surge in its credit default swaps since their introduction in 2019, may have contributed to this trend. The Euro concluded the week with almost 1% gain against the US dollar, falling further away from its seven-week peak reached on Wednesday after a rally in the middle of the week, however, once concerns over Deutsche Bank were again touched upon, all gains from mid-week were given back.

Macro

In March 2023, the ZEW Economic Sentiment Indicator for Germany dropped by 15.1 points compared to the previous month and stood at 13, which was lower than the market’s anticipated value of 17.1. The decrease was attributed to a significant uncertainty in the global financial markets. Moreover, the evaluation of the economic situation also declined slightly from -45.1 in February to -46.5 in March.

On Wednesday, the Federal Reserve increased the fed funds rate by 25 basis points to 5%, as projected. This move led to higher borrowing costs, reaching levels not seen since 2007, as inflation remained high. While most investors anticipated the decision, some believed that the central bank should pause its tightening cycle to promote financial stability. However, Powell gave hints that rate hikes may continue until the end of this year. 

On Thursday, the Bank of England released the final decision for interest rates and, as expected, the increase was by 25 basis points making it 4.25%. 

The GfK Consumer confidence released in the UK for March has shown improvements, however, the number is still below 0 making it -36 which confirmed a slowdown in the weak sentiment compared to the previous figure of -38 as inflation still remains high. 

In February 2023, orders for durable goods in the US, which gauge the value of orders received by manufacturers of products designed to last at least three years, decreased by 1% on a monthly basis. This followed a previously adjusted 5% decline in January and it was in contrast to the market’s prediction of a 0.6% increase.