END OF DAY REPORT APRIL 19th

HIGHLIGHTS

ECB's Lane repeats the ECB's data-dependent stance and the April bank lending survey will be an important input for the May meeting; If the baseline scenario persists it will be appropriate to raise rates further Moreover, the April Corporate Telephone Survey (CTS) will provide us with feedback from the corporate sector, including in relation to financing conditions. Looking further ahead, the next Survey on Access to Finance (SAFE) will supply comprehensive information on the financing conditions facing firms in time for our June meeting. Over the medium term, investment in commercial real estate is expected to be hit particularly hard by the tighter lending conditions, while the sharp projected slowdown in house prices will reduce residential investment. Since the cut-off date for the March 2023 projections, the incoming data have been mixed. Incoming survey indicators suggest that the steady improvement in business and consumer sentiment, which remains at low levels, may have stalled.
House Republicans will propose lifting the debt limit by USD 1.5tln or until March 31st 2024, whichever comes first with the bill expected to be posted shortly, according to Punchbowl's Sherman
Google employees label AI chatbot Bard ‘worse than useless’ and ‘a pathological liar’, according to The Verge; new report shows employees begged the co. not to launch the product
UK Chancellor Hunt says when inflation is above 10% it is destabilizing the economy, says there is a plan to bring inflation down, the tightness of the labour market is a factor behind inflation

SUMMARY

Analysts at Capital Economics this week said they retained a downbeat view on the outlook for the banking sector, and are wary of banks' exposure to the CRE, which was already struggling in a post-pandemic world of higher interest rates, increased online shopping and remote working. And this is a situation that tighter credit conditions could exacerbate, given that US banks underwrite around 58% of commercial mortgages, and 32% of multi-family residential mortgages. "Though the damage to banks from souring CRE exposures won’t materialise overnight in the way that crystallised losses on hold-to-maturity securities did for Silicon Valley Bank, they could begin to suffer from falling asset values over the coming months if CRE borrowers run into difficulty when trying to roll over their debts," CapEco warns. Meanwhile, as the Fed and others continue their course of monetary tightening, Citi has warned that equities and other risk assets will likely take a hit as central banks withdraw as much as USD 600-800bln of stimulus in the coming weeks. "With peak liquidity past, we would not be at all surprised if markets were now to experience a sudden pressure loss," Citi said.