The Fed did what investors expected it to do yesterday and markets reacted well. But the party was spoiled by Janet Yellen, who refused to embark on a universal deposit guarantee of US banks. As a result, the banking turmoil continued.

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Investors have a date with the Fed this afternoon, and they’re trading with a certain amount of confidence this morning that contrasts with recent days. All the main global indices are in the green, with the S1P 500 up 1.3%, the Dow Jones up 0.9% and the Nasdaq 100 up 1.4%  after the open.

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Banks fall and markets rise. It's a bit surprising, but investors are still quite comfortable with the return of central banks bailouts. After all, when the sorcerer's apprentices of finance mess up, there is always a regulator or a central bank to ensure the systemic balance. 

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Wall Street's main indexes opened on a mixed note, with the Dow Jones and the S&P in the green while the Nasdaq remained in red, as investors assess the takeover of Credit Suisse and its impact on the Fed’s rate decision on Wednesday.

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The support measures implemented by financial authorities after a wave of bankruptcies in the banking sector seem to have paid off. But I've been around the markets for too long to find this totally reassuring. 

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Credit Suisse troubles rocked the US and Europe’s banking sector yesterday. The guarantee provided by the Swiss National Bank last night eased fears somewhat, but the cracks that are appearing on both sides of the Atlantic in the financial world are worrying. Will this force central banks to end restrictive monetary policies? This is the big question of the second half of March, which will probably shape the months to come.

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Yesterday, the calm had returned to stock markets after positive US data showing that inflation slowed down in February. The statistics ended the global rout in banking stocks that started on Friday after the collapse of SVB Financial. Figures were in line with expectations, which fueled expectations of a smaller rate hike at the Fed meeting next week. But then Credit Suisse threw a spanner in the works...

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U.S. bank failures and the strong response from authorities are confusing investors. Some are appalled by the speed with which the situation has deteriorated, while others believe that it will force the Fed to return to a better monetary policy, supporting activity and restoring confidence. As is often the case, the reality is likely to be more complex with the addition of a new variable to an already complex economic equation. 

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If there’s an expression that has been overused in the last 72 hours in financial markets, it’s certainly "the canary in the coal mine". Is Silicon Valley Bank (SVB Financial) the "canary in the coal mine", i.e. the first domino in a catastrophic series? US authorities have ensured that this is not the case, but by sending an insidious message: take risks, we will always take care of the rest. Investors seem reassured. Let's examine this in a little more detail.

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Has anyone heard about SVB Financial before yesterday? Not me! This Californian bank created havoc on Wall Street yesterday by exposing its difficulties. With a considerable psychological effect that awakened the old demons of the market. We'll see if this is just another variable in the complex equation on rates and inflation or if the panic will pass.

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