- European shares and S&P 500 futures rise
- Eyes on Deutsche Bank, credit default swaps
- Deposits flow to money market funds, large banks
LONDON, SYDNEY, March 27 (Reuters) – Global shares rose after First Citizens BancShares ( FCNCA.O ) reassured fragile markets on Monday by saying it would take deposits and loans from failed Silicon Valley Bank ( SIVB.O ).
The agreement gave the markets a breather after several weeks of new bank collapses, bailouts or emergency aid from the authorities.
The pan-European STOXX 600 (.STOXX) index was up 1.0% by 0942 GMT. The STOXX banks index (.SX7P) jumped 2.3% in early trade and was last up 0.8%.
Deutsche Bank ( DBKGn.DE ) shares rose around 4% after leading the sector’s decline on Friday, as the cost of insuring the German bank’s debt against the risk of default rose.
S&P 500 futures traded up 0.3% and Nasdaq futures rose 0.1%.
China saw industrial profits shrink 22.9% in the first two months of this year as factories struggled to recover from the Covid-related disruptions. Chinese blue chips (.SSEC) fell 0.4%, further weighed down by geopolitical tensions.
Overall, sentiment remained nervous due to concerns about banking stress and the impact on global growth.
“The banks have been under enormous pressure. SVB and Credit Suisse are putting the banks under a microscope on the impact higher interest rates will have on certain credits,” said Victor Balfour, investment strategist at Rothschild & Co. in London.
“But we don’t think these specific names are symptomatic of the broader banking system,” he said.
Although inflation has not yet abated, the focus in the coming months should shift to expectations of corporate earnings, which fell during the second half of last year, Balfour said.
THE PRICE FOR FAT CUT
Minneapolis Fed President Neel Kashkari said Sunday that officials were watching “very, very carefully” to see if the banking stress led to a credit crunch that threatened to tip the economy into recession.
That again meant the Fed was closer to a peak in interest rates, he added. The markets are well ahead of the central bank when it comes to pricing around an 80% chance that rates have already peaked, while a first rate cut is the odds for as early as July.
Fed Governor Philip Jefferson will speak later on Monday, while Fed Deputy Chairman for Supervision Michael Barr will testify on “Bank Overview” before the Senate on Tuesday.
Two-year Treasury yields have fallen 92 basis points so far this month to 3.87%.
That dive has sometimes been a drag on the dollar, at least against the safe-haven Japanese yen, where it stands at 131.10 yen, after hitting a seven-week low of 129.65 last week.
The euro suffered its own reversal on Friday on concerns about Deutsche, and was last at $1.0770, well off last week’s $1.0930 peak.
The fall in yields has combined with a run from risk to brown gold, which was trading at $1,970 an ounce after hitting a high above $2,009 last week.
Oil prices were little changed, losing almost 10% for the month as worries about global growth undermine commodities in general.
Brent and US crude rose about 0.5% to $75.35 a barrel and $69.90 a barrel, respectively.
Reporting by Nell Mackenzie and Wayne Cole; Editing by Sam Holmes, Jacqueline Wong, Peter Graff
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