The ECB raised rates by 50 basis points. The expectations was "give or take" split between 25 basis points and 50 basis points going into the decision. As a result, the decision was a bit more hawkish. The statement said that "inflation is projected to remain too high for too long". The ECB's mandate is to target inflation to 2%. Later ECBs Lagarde reinforce this idea when she said there was "No trade-off between price stability and financial stability". She said that the ECB could always react to financial stability support through various financial programs and tools, but the focus is on price stability.

Having said that Lagarde also said that:

  • Banks are in good shape
  • They would back off promises for future hikes
  • They would be data dependent.

The US economic data today was mixed. Initial jobless claims were stronger after they moved back below the 200K level to 192K after a one-week reprieve above the level last week. The initial jobs have been below 200k for eight of the last nine weeks. Also stronger today was housing starts and building permits. Housing starts came in stronger at 1450K versus 1310K estimate. Building permits were also much higher than expected at 1524K vs1340K estimate.

What was not so hot was the Philly Fed index which moved lower to -23.2 versus -15.6 estimate. Yesterday the Empire manufacturing was also weaker than expectations at -24.6 versus -7.9 expected. Import price data was marginally lower helping the inflation outlook picture.

Regarding the financial troubles, Credit Suisse was thrown a lifeline from the Swiss National Bank before the New York open. That helped to stabilize Credit Suisse shares.

In the US, First Republic Bank traded sharply lower before the open as concerned about a bank run weighed on shares. The shares closed at $31.16 yesterday, and opened at $20.22 today before moving down to a intraday low of $19.80. However, reports later in the day were of a bank rescue from the banks. More specifically major financial institutions pledged to deposit $30 billion into First Republic to make up for the shortfall from deposit withdrawals.

Later after the close the Fed announced that the balance sheet increase by $297 billion last week and that borrowings at the Fed discount window rose by $148.2 billion. Those are big increases, but there have been a lot of flows as a result of all the banking issues over the last week or so.

The strongest to weakest of the major currencies

So how did everything pan out in the market:

The strongest currency was the AUD. The weakest was the JPY (see rankings above). The USD fell against all the major currencies as flight to safety pressures were lower .

In the US stock market, the major indices rose sharply:

  • Dow Industrial Average was 371.98 points or 1.7% at 32246.56
  • S&P index rose 68.37 points or 1.76% at 3960.29
  • NASDAQ index rose 283.23 points or 2.48% at 11717.29

In the US debt market:

  • two year yield is trading at 4.174% up 19.9 basis points
  • five year yield is trading at 3.733% of 15 basis points
  • 10 year yield is trading at 3.578% up 8.5 basis points
  • 30 year yield is trading at 3.711% up 2.4 basis points