And so it begins. DXY actually fell Friday night despite strong US jobs, which were overshadowed by the American regional bank crisis:
AUD was poleaxed on the crosses:
The market is the least short AUD in two years:
Gold and oil rose. Good luck with that:
Dirt showed more sense:
Miners (NYSE:RIO) broke support:
EM stocks (NYSE:EEM) are not well:
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But junk (NYSE:HYG) is OK so long as DXY falls:
Treasuries were red hot as the curve steepened:
And stocks were hit again:
The market is caught in a pincer as US jobs remain firm with a monthly 0.5% wage gain far too strong for the Fed:
Total nonfarm payroll employment rose by 311,000 in February, and the unemployment rate edged up to 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, retail trade, government, and health care. Employment declined in information and in transportation and warehousing.
…The change in total nonfarm payroll employment for December was revised down by 21,000, from +260,000 to +239,000, and the change for January was revised down by 13,000, from +517,000 to +504,000. With these revisions, employment gains in December and January combined were 34,000 lower than previously reported.
On the other hand, the Fed has finally broken something big enough to matter, regional banks (NYSE:KRE):
The extraordinarily stupid Silicon Valley Bank, which appears to have been little more than a crapto slush fund, was resolved by the FDIC. But not before it shook the foundations of trust in the smaller banks.
They are vulnerable on the asset side to commercial real estate falls and the liability side to both illiquid Treasury holdings and big deposit holders. Expect more news of bank runs from the segment in the weeks ahead:
Needless to say, this triggered the repricing of bank funding across the board:
How far this Minsky moment runs is now up to the Fed. Economic data is telling it to hike 50bps. The rising Minsky moment is telling it to stop and reverse course. Junk spreads and the equity market are not yet distressed enough to push it either way.
This may or may not be the Minsky moment to end the cycle. But, either way, one such is coming and neither equities nor AUD is priced for it.
Written By:
David Llewellyn-Smith
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