European banking stocks experienced a huge sell-off on Friday, with Deutsche Bank being hit particularly hard, dropping 8.5%, as the cost of insuring its debt against default reached a four-year high. Investors, still jittery after the recent troubles at Credit Suisse, are hesitant to hold positions over the weekend if there is any concern around them, which may have contributed to Deutsche Bank’s decline. Meanwhile, UBS and Credit Suisse were reported to be among the banks under scrutiny in a US Department of Justice probe into whether financial professionals helped Russian oligarchs evade sanctions. Raiffeisen Bank International also saw a slide after reports emerged that the European Central Bank was pressuring the bank to unwind its profitable business in Russia. Despite these concerns, European Union leaders and the ECB sought to calm fears, stating that EU lenders were well-capitalised and liquid.

Industrial Profits in China Plunge on Slowing Growth

Profits of Chinese industrial firms dropped 22.9% YoY, and full-year profits of 2022 also declined 4% YoY for the first two months of 2023, according to the National Bureau of Statistics. Even though industrial production has rebounded, market demand hasn’t fully recovered due to continued weaknesses in real estate investment, higher-than-expected unemployment, and an uncertain global environment. The decline in revenue has further weighed on gross corporate profits, with costs dropping less than revenue. In February, producer deflation deepened due to the softening of commodity costs, leading to falling prices for businesses. China’s economic growth target of around 5% this year depends on a rebound in domestic investment and consumer demand. Economists surveyed by Bloomberg predict that the economy will grow 5.3% this year. 

Tether Announces $1.6 Bn in Surplus Reserves

Tether, the cryptocurrency firm behind the USDT stablecoin, expects to make a profit of $700 million in Q1 2023, taking its total excess reserves to over $1 billion for the first time, according to the company’s technology chief. Tether, which has faced criticism over the transparency of its reserves, moved from commercial paper to US Treasuries in response to concerns. Tether generates income from fees and investments in digital tokens and precious metals, as well as issuing loans to other institutions. The value of all USDT in circulation has grown to $78.14 billion thanks to the collapse of Circle rival USD Coin’s peg to the dollar. The government guaranteeing SVB depositors allowed USDC to regain its peg, while investors flocked to Tether. Tether’s reserves have been questioned, but Paolo Ardoino, Tether’s chief technology officer, said the firm was the “most safe” option.