- Asian Stock Markets:
- Nikkei up 0.4%, S&P 500 and European futures higher
- Eyes on Deutsche Bank, Credit Default Swaps
- Deposits flow into money market funds, big banks
SYDNEY, March 27 (Reuters) – Asian stocks struggled on Monday, while US and European stock futures surged higher on hopes authorities were working to contain stress in the global banking system, even as the cost of default insurance were approaching dangerous levels.
Nervous were reports that First Citizens BancShares Inc (FCNCA.O) is in advanced talks to acquire Silicon Valley Bank (SIVB.O) from Federal Deposit Insurance Corp.
S&P 500 futures were up 0.3% and Nasdaq futures were up 0.4%. EUROSTOXX 50 futures were up 1.1% and FTSE futures were up 0.7%.
Japan’s Nikkei (.N225) was up 0.4% but South Korea (.KS11) was down 0.3%. MSCI’s broadest index of Asia Pacific equities outside of Japan (.MIAPJ0000PUS) was also down 0.3%, led by a 0.9% decline in Chinese blue chips (.CSI300).
Shares in Chinese search engine giant Baidu (9888.HK) fell more than 3% after it canceled a planned livestream product launch open to media and the public related to its ChatGPT-like Ernie bot.
Sentiment remained jittery after shares of Deutsche Bank (DBKGn.DE) fell 8.5% on Friday and the cost of insuring its bonds against the risk of default rose sharply, along with many’s credit default swaps (CDS). other banks.
“The current level of credit default swaps for European banks is only marginally lower than at the height of the European financial crisis in 2013,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“If these CDS don’t normalize, it’s very likely that the stock market will suffer for many more days.”
Over in the United States, depositors fled from smaller banks to their larger cousins or to money market funds. Money market fund inflows surged by more than $300 billion last month to a record over $5.1 trillion.
FED CUT PRICES
Minneapolis Fed President Neel Kashkari said Sunday officials are watching “very, very closely” whether the bank stress is leading to a credit crunch that threatened to plunge the economy into a recession.
That in turn means the Fed is closer to a peak in interest rates, he added. Markets are well ahead of the central bank on an 80% chance rates have already peaked, while a first rate cut is likely as early as July.
Fed Governor Philip Jefferson will speak later Monday, while Fed Vice Chairman Michael Barr will testify before the Senate on “bank oversight” on Tuesday.
Two-year Treasury yields are down a staggering 102 basis points to 3.77% so far this month, while the full 30-year yield curve is below the 4.85% effective policy rate.
That tumble has weighed on the dollar at times, at least against the safe haven Japanese yen, where it stands at 130.60 yen after hitting a seven-week low of 129.65 last week.
The euro suffered a trend reversal of its own on Friday amid worries about the German, last trading at $1.0770 and well below last week’s high of $1.0930.
The drop in yields has combined with a flight from risk to polished gold, which has traded at $1,975 an ounce after hitting a high above $2,009 last week.
Oil prices were little changed, posting losses of almost 10% over the month as concerns about global growth undermine commodities in general.
Brent fell 1 cent to $74.98 a barrel, while US crude was up 2 cents to $69.28 a barrel.
Reporting by Wayne Cole; Edited by Sam Holmes and Jacqueline Wong
Our standards: The Thomson Reuters Trust Principles.
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