To start this weekly, we cover a brand not commonly spoken about around the market but certainly important to the chocolate lovers. Toblerone bars, owned by Mondelez, is set to lose its iconic Matterhorn from the packaging under Swissness legislation as production has now moved to Slovakia. National symbols are not permitted on products that are produced with less than 80% of raw materials from Switzerland, with the new branding set to feature a signature from the founder, Theodore Tobler.
One of the most anticipated events this week was the commentary of US Fed Chair Jerome Powell on Tuesday. It’s important to remember that commentary from Powell can often be as significant as the actual interest rate moves as it signals to investors the trajectory of future rates. The main takeaways were that interest rates were likely to rise more than expected in a response to strong inflation and economic data, and the Fed are prepared to move in larger strides, possibly returning to raising rates by 50 basis points. The Fed’s base rate is 4.75% following February’s 0.25% rise, but investors are now predicting rates could rise to 5.6% at its peak. The S&P 500 dropped around 1.3% on the day with the 2-year treasury yield rising to 5% for the first time since 2006.
UK Chancellor Jeremy Hunt is also set to speak soon as investors brace for next week’s budget. With a £30bn windfall in the public sector borrowing, Mr Hunt is facing more pressure to relax the harsh stance he took when first entering the job. He is expected to lay out economic growth measures, address Britain’s workforce and announce tax incentives even with corporation tax climbing from 19% to 25% next month. It is possible to assume that Mr Hunt may be unadventurous with this March budget to leave himself and the Conservative party wiggle room, as he eyes the election timetable.
The UK has certainly been hit with a cold snap this week which is adding strain on the country’s power and transport networks. The national grid was forced to use coal reserves on Tuesday but has not been exerted for the extra supply on any other days.
Germany, Europe’s largest economy, makes the weekly again as they have without warning vetoed their European Union deal to effectively ban the sale of new cars with combustion engines from 2035. The EU have bid to cut emissions by 55% by 2030 with car pollution accounting for almost 30% of worldwide pollution. Germany’s automotive industry is approx. 5% of the country’s GDP, with carmakers Mercedes Benz, Volkswagen and BMW employing over 800,000 people. It looks like Germany will now not support the proposal without a clear plan on how synthetic fuels could be used to meet the zero-CO2 target.
US bank Silicon Valley Bank (SVB) saw its share price collapse on Thursday and is down heavily in pre-market trading this morning. The bank has seen a run-on deposits and as such has had to sell bonds for liquidity, locking in heavy losses. The bank has a high reliance on venture capital corporates as clients, who are now being advised to withdraw their deposits which is escalating the problem further. The concerns around SVB’s survival has impacted banking shares in general, with the sector down on Friday morning. HSBC share’s were down around 5% at open.
US Non-Farm Payrolls data, like last month, came in ahead of consensus. The data showed 311,000 jobs had been added to the economy, against an expected increase of 205,000. Wage inflation was 0.2%, lower than last month’s 0.3% and the slowest increase since February 2022.
This was always going to be an eventful week, with key speeches and data releases occurring, and markets have also had to digest the unexpected events unfolding at Silicon Valley Bank. Next week looks equally as busy, with all eyes on the US Fed’s meeting and to what degree they will raise interest rates further.
Nathan Amaning, Investment Analyst
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