Big Banks Are Being Bailed Out and Inflation Is Still Firmly Causing Havoc
Banks it all that anyone can talk about this week, but with tax and interest rates changing it’s been a hectic week for the markets.
- Big banks bailed out to save market jitters
- UK budget eases pension taxes and boosts businesses
- ECB raises interest rates, again
- Sports are having a moment on the stock market too
Big banks are being bailed out to save market jitters
Following the collapse of Silicon Valley Bank last week, a handful of other banks gave indications that they were headed in the same direction.
First Republic bank in the US crashed in value, leading to 11 other big banks agreeing to bail out the bank, amounting to a $30 billion rescue package.
Credit Suisse then hit its own roadblock, having been downgraded to one notch above junk by S&P. Their biggest investor Saudi National Bank announced they’d be making no more investment to rescue the bank, after a troubled few years.
The Swiss central government therefore agreed a $54 billion package to maintain stability in the bank's price. There are now ongoing talks of a merger with large rival UBS.
Not surprisingly, the global banking sector has taken a huge hit in confidence, with banking stocks on the S&P 500 being some of the biggest losers of the week. We’re being warned that it’s not as structurally similar to 2008, but the worries of a bank run and lack of confidence in the market seem to be sticking around for a short while longer.
UK budget hits pension taxes
The chancellor announced his planned changes to the budget, spelling big changes for taxation in the UK.
First up is the pension changes. The lifetime allowance, which taxes total pension savings over the value of £1,073,100, has been abolished. This means that more can be saved into pensions overall without hefty taxation.
Staying on pensions, the annual allowance has been raised from £40,000 to £60,000, allowing individuals to save more with tax benefits into their pensions every year.
Business has also seen a boost, with various tax breaks to incentivise the growth of a ‘Silicon Valley’ sector in the UK.
Lastly, childcare has seen a huge turnaround, with 30 hours of free childcare for eligible parents from 2024 onwards.
ECB raises interest rates, again
The European Central Bank has announced it is raising interest rates (again), this time by 0.5%.
This takes the interest rate from 3% to 3.5%, all in an attempt to control the inflation levels that are said to have been high for “far too long”.
They have made it clear that this is separate from the current market turmoil involving banks and particularly Credit Suisse, which is a little closer to home.
In the week that Argentina’s inflation exceeded 100%, the global battle against inflation is still waging firmly on.
Sports are having a moment on the stock market too
The Glazer family, the current owners of Manchester United, have said that they’re looking to sell the club for the modest sum of $5 billion. This is somewhat over the current valuation of the club on the New York Stock Exchange, but nonetheless there are interested buyers.
British Billionaire Jim Ratcliffe and Sheikh Jassim Bin Hamad Al Thani have both thrown their hats in the ring, which may see one of the biggest sports clubs on the stock exchange taken into private ownership.
It’s not all about football though, as Esports have also hit market headlines. FaZe clan, who started out as a gaming team and progressed to a listed company, launched on the stock exchange last year at the value of $700 million. The stock price is now a fraction of that and even fell below the dangerous $1 mark in January.
With Zwift also announcing more redundancies, Esports aren’t immune to market wobbles like the tech or sports sectors that it straddles.