Last week was a volatile one for financial markets, beginning with Fed Chair Jerome Powell’s testimony to Congress on Tuesday and concluding with the collapse of Silicon Valley Bank — and another strong jobs report — on Friday.
The S&P 500 index erased almost all its gains for the year as bank stocks slid after SVB was taken into receivership.
Bonds benefitted from a “flight to quality” with two-year yields falling 48 basis points in two days and 10-year bond yields down 29bp over the same period.
The collapse of SVB was partly due to losses on its bond portfolio on the back of aggressive Fed rate rises since last year and raised concerns that other (small) banks may face similar pressures.
There were other factors specific to SVB’s business model that contributed significantly to its liquidation, and the larger banks are well capitalised and unlikely to face similar problems.
Moreover, regulators over the weekend took steps to ensure banks can access liquidity from the Fed if needed, and that all depositors of SVB would have access to their funds, which should go some way towards reassuring markets.
However, the events at the end of last week, and their impact on confidence more broadly, may complicate monetary policy decision making for the Fed.
In his testimony to the Senate banking committee last week, Mr Powell indicated that the Fed may need to raise rates further than previously expected, and opened the door to a 50bp increase in March if the “totality of the data” warranted it.
His comments came after a blowout US jobs report and higher-than-expected inflation data for January, as well as economic survey data that pointed to an acceleration in economic activity at the start of this year, rather than a slowdown.
Consumer sentiment improved in February and activity in the housing market picked up in January.
While the manufacturing surveys remain in contraction territory, activity in the services sector has improved and, importantly for Fed, the surveys pointed to accelerating price pressures in February.
Overall, the US economy appears to be very resilient after 450bp of rate rises and against this backdrop, it was perhaps not wholly surprising that Mr Powell indicated that rates may need to move higher than previously indicated.
The Fed’s December 2022 interest rate projections showed a likely peak of 5.25 per cent in the Fed Funds rate this year, although several policy makers expected rates to rise more than this.
The real hawkish surprise in Mr Powell’s comments was that the Federal Open Market Committee might consider a larger increment than 25bp at coming meetings.
The February employment report released on Friday confirmed the strength of the US labour market. After a gain of 504,000 jobs in January, another 311,000 jobs were added last month, well above the 225,000 the market had been expecting.
While the unemployment rate edged up to 3.6 per cent from 3.4 per cent in January, this was due to more people entering the labour force and looking for work rather than people being let go from their jobs.
Wage growth at 4.6 per cent year on year also remains far above the 3 per cent the Fed believes is consistent with its inflation target.
Without the SVB developments, the February jobs data may have cemented a 50bp rise at this month’s FOMC meeting.
But the collapse of the bank underscores the need to adjust policy at a more measured pace, to allow the full effect of the 450bp in rate rises over the past nine months to feed through to all sectors of the economy.
Markets are now pricing in a lower probability of a 50bp move in March than they were immediately after Mr Powell’s testimony to Congress.
There is one more key release before the FOMC meets on March 21 and 22, and that is the February inflation data, which is due on March 14.
The market expects inflation to fall back to 6 per cent year on year from 6.4 per cent in January, with core inflation easing slightly to 5.5 per cent.
If the inflation reading comes in higher than forecast, there may be some members of the committee who push for a bigger rate increase.
At this stage, however, the consensus view is that the Fed will probably continue with a more moderate 25bp increase but indicate a higher peak in the Fed Funds rate this year in its new interest rate projections, the so-called dot plot.
Khatija Haque is chief economist and head of research at Emirates NBD
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UAE finals day
Friday, April 13
Rugby Park, Dubai Sports City
3pm, UAE Conference: Dubai Tigers v Sharjah Wanderers
6.30pm, UAE Premiership: Dubai Exiles v Abu Dhabi Harlequins
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Brown/Black belt finals
3pm: 49kg female: Mayssa Bastos (BRA) v Thamires Aquino (BRA)
3.07pm: 56kg male: Hiago George (BRA) v Carlos Alberto da Silva (BRA)
3.14pm: 55kg female: Amal Amjahid (BEL) v Bianca Basilio (BRA)
3.21pm: 62kg male: Gabriel de Sousa (BRA) v Joao Miyao (BRA)
3.28pm: 62kg female: Beatriz Mesquita (BRA) v Ffion Davies (GBR)
3.35pm: 69kg male: Isaac Doederlein (BRA) v Paulo Miyao (BRA)
3.42pm: 70kg female: Thamara Silva (BRA) v Alessandra Moss (AUS)
3.49pm: 77kg male: Oliver Lovell (GBR) v Tommy Langarkar (NOR)
3.56pm: 85kg male: Faisal Al Ketbi (UAE) v Rudson Mateus Teles (BRA)
4.03pm: 90kg female: Claire-France Thevenon (FRA) v Gabreili Passanha (BRA)
4.10pm: 94kg male: Adam Wardzinski (POL) v Kaynan Duarte (BRA)
4.17pm: 110kg male: Yahia Mansoor Al Hammadi (UAE) v Joao Rocha (BRA
Scotland's team:
15-Sean Maitland, 14-Darcy Graham, 13-Nick Grigg, 12-Sam Johnson, 11-Byron McGuigan, 10-Finn Russell, 9-Ali Price, 8-Magnus Bradbury, 7-Hamish Watson, 6-Sam Skinner, 5-Grant Gilchrist, 4-Ben Toolis, 3-Willem Nel, 2-Stuart McInally (captain), 1-Allan Dell
Replacements: 16-Fraser Brown, 17-Gordon Reid, 18-Simon Berghan, 19-Jonny Gray, 20-Josh Strauss, 21-Greig Laidlaw, 22-Adam Hastings, 23-Chris Harris
The biog
Name: Abeer Al Shahi
Emirate: Sharjah – Khor Fakkan
Education: Master’s degree in special education, preparing for a PhD in philosophy.
Favourite activities: Bungee jumping
Favourite quote: “My people and I will not settle for anything less than first place” – Sheikh Mohammed bin Rashid.
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
MATCH INFO
Euro 2020 qualifier
Ukraine 2 (Yaremchuk 06', Yarmolenko 27')
Portugal 1 (Ronaldo 72' pen)
'Tell the Machine Goodnight' by Katie Williams
Penguin Randomhouse
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If you go
The flights
The closest international airport for those travelling from the UAE is Denver, Colorado. British Airways (www.ba.com) flies from the UAE via London from Dh3,700 return, including taxes. From there, transfers can be arranged to the ranch or it’s a seven-hour drive. Alternatively, take an internal flight to the counties of Cody, Casper, or Billings
The stay
Red Reflet offers a series of packages, with prices varying depending on season. All meals and activities are included, with prices starting from US$2,218 (Dh7,150) per person for a minimum stay of three nights, including taxes. For more information, visit red-reflet-ranch.net.
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Race card
6.30pm: Handicap (TB) $68,000 (Dirt) 1,200m
7.05pm: Meydan Cup – Listed Handicap (TB) $88,000 (Turf) 2,810m
7.40pm: UAE 2000 Guineas – Group 3 (TB) $125,000 (D) 1,600m
8.15pm: Firebreak Stakes – Group 3 (TB) $130,000 (D) 1,600m
9.50pm: Meydan Classic – Conditions (TB) $$50,000 (T) 1,400m
9.25pm: Dubai Sprint – Listed Handicap (TB) $88,000 (T) 1,200m
57%20Seconds
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Company name: Play:Date
Launched: March 2017 on UAE Mother’s Day
Founder: Shamim Kassibawi
Based: Dubai with operations in the UAE and US
Sector: Tech
Size: 20 employees
Stage of funding: Seed
Investors: Three founders (two silent co-founders) and one venture capital fund
THREE
%3Cp%3EDirector%3A%20Nayla%20Al%20Khaja%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Jefferson%20Hall%2C%20Faten%20Ahmed%2C%20Noura%20Alabed%2C%20Saud%20Alzarooni%3C%2Fp%3E%0A%3Cp%3ERating%3A%203.5%2F5%3C%2Fp%3E%0A
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
Mohammed bin Zayed Majlis
Score
New Zealand 266 for 9 in 50 overs
Pakistan 219 all out in 47.2 overs
New Zealand win by 47 runs
New Zealand lead three-match ODI series 1-0
Next match: Zayed Cricket Stadium, Abu Dhabi, Friday
Bio
Age: 25
Town: Al Diqdaqah – Ras Al Khaimah
Education: Bachelors degree in mechanical engineering
Favourite colour: White
Favourite place in the UAE: Downtown Dubai
Favourite book: A Life in Administration by Ghazi Al Gosaibi.
First owned baking book: How to Be a Domestic Goddess by Nigella Lawson.
The specs
Engine: 5.2-litre V10
Power: 640hp at 8,000rpm
Torque: 565Nm at 6,500rpm
Transmission: 7-speed dual-clutch auto
Price: From Dh1 million
On sale: Q3 or Q4 2022
ASHES SCHEDULE
First Test
November 23-27 (The Gabba, Brisbane)
Second Test
December 2-6 (Adelaide Oval, Adelaide)
Third Test
December 14-18 (Waca Ground, Perth)
Fourth Test
December 26-30 (Melbourne Cricket Ground, Melbourne)
Fifth Test
January 4-8, 2018 (Sydney Cricket Ground, Sydney)
The specs: 2018 Nissan Patrol Nismo
Price: base / as tested: Dh382,000
Engine: 5.6-litre V8
Gearbox: Seven-speed automatic
Power: 428hp @ 5,800rpm
Torque: 560Nm @ 3,600rpm
Fuel economy, combined: 12.7L / 100km
THE SPECS
Engine: 3.5-litre supercharged V6
Power: 416hp at 7,000rpm
Torque: 410Nm at 3,500rpm
Transmission: 6-speed manual
Fuel consumption: 10.2 l/100km
Price: Dh375,000
On sale: now
