Block trades trouble banking stocks

The benchmark S&P 500 opened in the red on Monday as several banking stocks plummeted as they braced themselves for potential losses.

Losses seemed to have occurred as Archegos Capital Management a family office run by former “Tiger cub” Bill Hwang, was unable to meet margin calls at the end of last week.   This led to a series of block trades in excess of $20 billion as Archegos counterparties liquidated positions in a number of stocks including Baidu Inc., ViacomCBS and Discovery rapidly driving their prices down.

As the market reacted on Monday the resulting sell-off saw Morgan Stanley fall by 2.63%, and Goldman Sachs down 0.51%, but these counterparties appear to have managed their exposure better than Nomura and Credit Suisse which have both indicated they are potentially exposed to billions of dollars in losses from the fire sale.  Nomura saw its share price drop 16.33%, its biggest one-day drop on record.   Credit Suisse lost 13.83%, which is its biggest fall in the last year.

Overall markets have remained steady as there does not currently appear to be wide-spread contagion from the trades.    The Dow was up 0.30% on the back of a large order of 737-MAX 8 aircraft by Southwest, while the S&P shook off the decrease in bank stocks to trade just 0.09% down.  The tech-heavy NASDAQ was the worst performing index falling 0.60%.

Italy lowers 2021 GDP forecast

As Coronavirus cases continue to climb domestically, and in Europe as a whole, Italy today revised its 2021 GDP forecasts.

The world’s 9th largest economy today announced that it will revise December’s 2021 growth target of 6%, to 4.1% this year and 4.3% in 2022.

With Former ECB President, Mario Draghi now at the helm in Rome, his government has pencilled in a recent rise of COVID-19 cases to growth expectations.

Infections are nearing 20,000 per day, and as we head into the spring months, which typically is the start of the tourist season, the expectations are that Italy may be closed for a while longer.

Last year Italy’s economy shrank by a record of 8.9%.

Bitcoin jumps as Visa set to accept Cryptocurrencies

Bitcoin rallied for yet another weekend, this time led by the news that Visa is set to accept the use of cryptocurrency.

The online payments platform is reported to be close to allowing USD Coin to be used when it comes to settling transactions on its payment network.

In a statement regarding the matter Visa said that, “We see increasing demand from consumers across the world to be able to access, hold and use digital currencies”.

The news saw BTCUSD hit a 10-day high of $58,368 to start the week.

Quote of the day – “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

Jim Rogers

Eliman Dambel

Senior Market Analyst