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MARCH 28, 2023

MARKET BOOST

On Monday, the three major U.S. stock indices showed positive growth. The Dow Jones Industrial Average increased by over 190 points and the S&P 500 experienced a slight increase. Of the 11 S&P sectors, eight finished the day with higher gains. Regional banks, which had been facing turmoil and losses in recent weeks, experienced a significant growth surge. This boost in confidence is attributed to the prospects of further government assistance, should it become necessary.

U.S. REGULATORS SUE BINANCE

The U.S. government has initiated its most forceful action to clamp down on Binance Holdings, and its CEO, Changpeng Zhao. The Commodity Futures Trading Commission (CFTC) filed a federal lawsuit accusing Binance and CZ of repeatedly violating US derivatives regulations as the company continued growing. Despite being obligated to register with the agency years ago, Binance has failed to do so and continues to disobey the CFTC’s rules. The regulator’s allegation is a significant blow to Binance and its CEO as they face mounting pressure from regulators worldwide who seek to regulate the fast-growing cryptocurrency industry. This lawsuit is also likely to have far-reaching implications for other international trading platforms seeking to operate in the US market.

MARKET DILEMMA

The market is facing a difficult situation where it has to choose between two risks – concerns about bank stability and interest rate risk. Even though there has been some good news about banks, people are still worried about potential problems.
During this past week, there was a positive assessment that banks were stable, which provided a sense of reassurance in the stock market. Nevertheless, this comfort was accompanied by the recognition of rate risks that could affect investment outcomes. This knowledge has diminished the chance of a significant rise in stock values as the first quarter comes to a close.

UNCERTAINTY

There has been a significant increase in the probability of another Federal Reserve rate hike, moving from 30% to 50% since Monday. Additionally, two-year Treasury yields have increased by going back above 4%; and the demand for US dollars, generated due to stress in the market, has decreased slightly.

INTERNATIONAL FINANCIAL NEWS

The European banking industry had mixed developments recently, where Swiss bank UBS gained a 1.4% increase in share prices on Monday and followed by a 1% increase the next day. CEO Ralph Hamers revealed that they foresee growth opportunities in their takeover of Credit Suisse. Meanwhile, concerns emerged as the top supervisor of the European Central Bank, Andrea Enria, expressed apprehension about the unexplained selloff of Deutsche Bank shares last week. This raised the concern that investors may be spooked by unexpected events that affect small and illiquid parts of the market.

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