The Day at a Glance | March 15 2023

*Moody`s changed its US banking system outlook from “stable” to “negative”. 

*The US Department of Justice and the SEC have opened investigations related to the collapse of Silicon Valley Bank. 

*In line with estimates, retail sales in the US logged a slight contraction in February (-0.4% monthly), while January`s reading was revised to 3.2%. 

*Inflation for producers in the US moderated more than expected in February, as it logged a 4.6% annual figure after recording a -0.1% contraction. 

*In China, January-February figures (due to the Lunar New Year) pointed towards a 2.4% increase in industrial production with respect to the same period of last year, slightly above estimates (2.6%e.). 

*Retail sales in China increased 3.5% annual in January-February against a -0.2% contraction in December. 

*Industrial production in the Eurozone logged a larger increase than that expected by the consensus, although it remains relatively weak. It logged a 0.7% monthly increase (0.9% annual), which compares positively against a 0.3% increase for both figures. 

*According to the US, a Russian combat jet intentionally crashed against one of its drones that was flying above the Black Sea, forcing its descent. It labeled the event as “unsafe, unprofessional and reckless”. However, Russia`s Ministry of Defense denied that its aircraft ever made “contact” with the US drone. 

Economic environment

Moody`s changed its US banking system outlook to negative. In the report, the outlook change reflects “the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY”. Additionally, six North American banks were reviewed for their credit ratings possibly being cut. These actions are relevant as the possible change in said credit ratings would impact funding costs for the sector, further deteriorating its current state – on top of the current pressures that stem from the FED`s increasing rates cycle in efforts to fight inflation. Lastly, and on a positive note, Moody`s pointed out that overall, the US banking sector is healthy – with enough cash and liquid assets to resist an economic recession. However, regulators could now demand they maintain larger amounts of capital.

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