Yesterday, markets were mixed, and headlines were dominated by the resumption of traffic in the Suez Canal after the container ship Ever Given was refloated. The Archegos case was also on investors’ radar, as the collapse of the family office cost dearly to a few banks that were not incredibly careful about the risks it had taken.

This did not upset the markets, even if it did highlight the bad habits of financial intermediaries as soon as they are intoxicated by rising indices. Greed and leverage, a good old cocktail, did the rest. Warren Buffett used to quote his partner Charlie Munger when he explained that there are three ways for a smart man to go broke: alcohol, ladies and leverage. But Buffett thinks the only real risk is leverage.

In the Archegos situation, the unwinding of overly risky positions caused quite a bit of damage to the intermediaries. The intricate workings are unlikely to go beyond the realm of insiders, but it appears that the banks that dealt with Bill Hwang's family office tried last week to collude to minimize the consequences of Archegos' collapse. The Financial Times explains that Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Nomura held a meeting with Archegos before the matter became public. But they failed to coordinate, and ended doing everything they can to save their own skin before the competition. At the obvious expense of Nomura and Credit Suisse, which could end up with 2 and 3 to 4 billion dollars of losses respectively. Amounts that have yet to be confirmed.

The return of heavy banking losses has logically impacted the sector yesterday, even beyond the individual punishments that have hit Nomura (-16%) and Credit Suisse (-13.8%). Excluding oil, it remains the main recipient of the sector rotation in favor of discounted stocks in 2021 with more than 16% increase on average in Europe since January 1, and 22% in the United States. Yesterday, Wall Street ended in a mixed bag but within narrow margins, with no real marked sectoral trend, with the exception of banks and a small bias in favor of defensive stocks. Investors took their cue from a Europe (excluding the UK) that is lagging behind in recovering from the coronavirus crisis, while the US is accelerating. Added to this is a bit of a wait-and-see attitude at the end of the quarter.

 

Economic highlights of the day

Today, we have the European business confidence index and German inflation figures for March.

The euro is trading at USD 1.1733, while the ounce of gold is down to USD 1,679. Oil is digesting its previous day's rebound, with WTI at USD 60.6 and Brent at USD 64.1. The 10-year T-Bond is offering a rising yield at 1.74%. Bitcoin is hovering towards the USD 59,000 mark.

 

On markets:

* Tesla lost a little more than 2% in pre-market trading after its founder, Elon Musk, posted a message on Twitter explaining that battery shortages are complicating the production of the group's first utility vehicle. In other news, the U.S. Federal Highway Traffic Safety Administration, NHTSA, announced that it will gather information about a recent crash between a Tesla and a semi-truck in New Jersey.

* BioNTech announced that it expects, with its partner Pfizer to increase the production capacity of the Covid-19 vaccine they are developing to 2.5 billion doses by the end of the year. Nasdaq-listed BioNTech shares are up more than 4% in pre-market trading.

* T-Mobile US announced Monday that it will discontinue its live TV offering at the end of April, which will be replaced by access to YouTube TV and YouTube Premium through a partnership with Alphabet.

* PayPal is up more than 1% in pre-market trading after announcing that it now accepts payments in cryptocurrencies.

* Gamestop is up 5% in pre-market trading after announcing the appointment of former Amazon executive Elliott Wilke as chief growth officer.