The S&P/TSX composite index screen at the TMX Market Centre in downtown Toronto is photographed on Friday, Nov. 11, 2022. Financial markets have flip-flopped all week as analysts say a crisis in confidence over the banking sector has led to a dramatic shift in expectations for the central bank's fight against inflation, and has made a recession more likely. THE CANADIAN PRESS/Tijana Martin
TORONTO – Financial markets have flip-flopped all week as a global crisis in confidence over the banking sector has led to a dramatic shift in expectations for central banks’ fight against inflation, and has made a recession more likely.
After the closures of Silicon Valley Bank and Signature Bank in the United States last weekend, fears over the financial system spread, sending bank stocks tanking Monday before markets recovered somewhat the next day.
On Wednesday, the flames were further fanned by European lender Credit Suisse’s latest problems, and on Thursday and Friday another bank joined in on the widening crisis, with the biggest U.S. banks coming to the rescue of First Republic Bank in an effort to prevent it from joining the ranks of SVB and Signature.
However, though bank stocks led major market drops on Monday, Wednesday and Friday, technology stocks told a different story throughout the week, helping lead index gains on Tuesday and Thursday.
Markets, which just over a week ago were anticipating the U.S. Federal Reserve would hike interest rates by up to half a percentage point at its next meeting, are now betting on a quarter-point hike or a hold – and some are even looking to potential cuts in the near future, though many analysts say that’s not realistic.
But experts say the events of this week have made a recession more likely, after weeks of strong economic data had sparked hope that the economy could avoid a downturn altogether.
This report by The Canadian Press was first published March 17, 2023.
