Financial fears intensify again.

After Wednesday’s European open, Credit Suisse announced that the Saudi National Bank would not be increasing its stake in the bank. The news triggered fresh fears over the outlook for Credit Suisse, especially given a potential contagion effect from SVB.

There was a fresh slump in its share price and also a wider contagion effect with European banks under heavy pressure as fear intensified.

With increased fears over the financial sector, there was a sharp re-pricing of ECB expectations with the chances of a 50 basis-point hike on Thursday cut to around 20%.

ECB council member Constancio also called for a maximum rate hike of 25 basis points.

With lower yields and a sharp ECB re-pricing, the Euro came under heavy pressure during the day with heavy losses against the dollar and yen.

There was an element of relief on Thursday as the Swiss National Bank stated that it would provide emergency liquidity support to Credit Suisse with a CHF50bn loan facility.

Equities regained some ground and the Euro recovered some ground.

US retail sales declined 0.4% for February and in line with consensus forecasts after a revised 3.2% jump the previous month. Underlying sales also met expectations with a 0.1% decline while the control group recorded a 0.5% monthly increase.

The New York Empire manufacturing index dipped sharply to -24.6 for March from -5.8 previously and much weaker than consensus forecasts of -8. There were also notably negative readings for new orders and production. Employment continued to decline on the month and there was a limited easing of inflation pressures. Companies were less confident in the outlook and inflation pressures are expected to decline more substantially.

US producer prices declined 0.1% for February compared with expectations of a 0.3% increase with the annual increase slowing to 4.6% from 5.7% and well below expectations of 5.4%. Core prices were unchanged on the month with the annual rate slowing to 4.4% from 5.0% and also below expectations of 5.2%.

There was a fresh shift in Fed Funds pricing on Wednesday with the most likely outcome now seen as no change in rates next week. There was a fresh shift on Thursday with a 0.25% hike seen as the most likely outcome. The US 2-year yield briefly dipped to 6-month lows at 3.75% before a recovery to near 4.00%.

The slide in US and European yields, together with a sharp decline in equities triggered fresh defensive support for the yen. The yen lost some ground on Thursday in very nervy trading.

Risk aversion and demand fears helped trigger a renewed slide in oil prices with global benchmarks sliding over 5% on the day before a recovery.

As far as markets are concerned, the UK budget had little impact with the slide in UK and global equities and risk aversion having a more substantial impact.

The latest Australian labour-market data recorded an employment increase of close to 65,000 for February compared with expectations of 48,000 with unemployment declining to 3.5% from 3.7%.

The ECB will announce its policy decision on Thursday, Both the decision and press conference from ECB Lagarde will trigger further high volatility.

The Euro came under heavy pressure during the day amid the slide in yields, ECB re-pricing and European banking fears. The dollar was hampered to some extent by a renewed slide in yields. EUR/USD still slumped to lows just below 1.0520 before a limited recovery to 1.0550. EUR/USD recovered to just above 1.0600 on Thursday.

Lower US yield and weaker equities triggered strong yen gains. USD/JPY dipped very sharply to lows near 132.20 before a recovery to just above 133.00 in volatile trading.

The Swiss franc was unable to gain support on defensive grounds given fears over Credit Suisse. EUR/CHF edged above 0.9800 with USD/CHF surging to highs at 0.9345. EUR/CHF recovered to 0.9860 on Thursday with USD/CHF just below 0.9300.

The budget had little Sterling impact given the financial focus. The UK currency was relatively resilient given the slide in equities. GBP/USD still dipped sharply to 1.2010 lows before a correction to 1.2070 on Thursday.

Commodity currencies posted sharp losses amid risk aversion and dollar gains. AUD/USD tested support just below the 0.6600 level. Stronger than expected employment data helped trigger a recovery to 0.6635 on Thursday. USD/CAD jumped to 1.3815 as oil prices also slumped before a retreat to 1.3760.

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