Stocks and futures hold steady as Credit Suisse woes ease: Markets wrap

(Bloomberg) — The turmoil in global financial markets eased on Thursday after regulators threw a lifeline at Credit Suisse Group AG, though signs of unrest persisted as volatility indicators remained elevated and overnight gains in US futures ahead of the interest rate decision of the European Central Bank disappeared.

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European stocks edged higher and Credit Suisse rallied the fastest in history at the open, leading a gauge for bank stocks to gain more than 1% after the embattled Swiss lender arranged to borrow up to 50 billion francs (May 54). billion US dollars) to borrow from a liquidity facility of the Swiss National Bank. US stock futures were little changed. Regional banks in the S&P 500 Index held on to gains but were significantly lower for the week. The Cboe volatility index edged up to 27, well above its long-term average of 20.

Treasury bonds were lower in early trade, taking the two-year yield back to 4% after historically sharp declines over the past few days. Bonds across Europe fell, with the German 10-year government bond yield rising 15 basis points. An index of the dollar slipped. The Swiss franc gained strength after a sharp sell-off on Wednesday. The euro rebounded from a 2-month low ahead of an expected ECB rate hike later on Thursday, with more investors now positioning for a 25 basis point move after previously expecting twice that much.

“ECB policymakers will grapple with the risk that sticking with the original plan of a 50 basis point hike could further erode confidence,” said Sarah Hewin, head of Europe and Americas research at Standard Chartered Plc. “Failing to tighten policy could be interpreted by the market as an admission of underlying vulnerabilities.”

The story goes on

The turmoil in the banking sector — which began last week after the collapse of Silicon Valley Bank and Signature Bank — has all but erased the S&P 500’s gains so far this year. All eyes are now on next week’s Federal Reserve monetary policy meeting, with traders almost evenly split on whether the central bank will hike interest rates. Market prices are now suggesting that the Fed will soon turn around and cut rates by up to 1% by the end of the year.

“Uncertainty is very high at the moment and there is a lot of selling due to the shock from higher volatility and other factors,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The shift in focus from inflation to growth concerns and financial stability has reversed the equity-bond correlation again. There is unlikely to be a stronger relief rally ahead of the Fed meeting.”

Elsewhere in markets, oil prices hovered near their lowest close in 15 months after a three-day slide sparked by the US banking crisis and accelerated by option buying. Gold held near a six-week high.

Important events this week:

• Eurozone interest rate decision, Thursday

• US housing starts, initial jobless claims, Thursday

• Janet Yellen appears before the Senate Finance Committee on Thursday

• University of Michigan Consumer Sentiment, Industrial Production, Conference Board Headline Index, Friday

Some of the key movements in the markets:

Shares

• S&P 500 futures were little changed as of 6:20 am New York time

• Nasdaq 100 futures up 0.3%

• Futures on the Dow Jones Industrial Average fell 0.2%

• The Stoxx Europe 600 rose 0.5%

• The MSCI World Index has hardly changed

currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.3% to $1.0610

• The British pound was little changed at $1.2058

• The Japanese yen rose 0.3% to 133.00 per dollar

cryptocurrencies

• Bitcoin surged 1.9% to $24,859.83

• Ether was up 0.6% to $1,663.68

Bind

• The 10-year government bond yield rose five basis points to 3.50%

• The 10-year German government bond yield rose 16 basis points to 2.29%

• The 10-year UK government bond yield rose 10 basis points to 3.42%

raw materials

• West Texas Intermediate crude was up 1% to $68.28 a barrel

• Gold futures fell 0.3% to $1,926 an ounce

This story was created with the support of Bloomberg Automation.

–Assisted by Richard Henderson, Sujata Rao and Sagarika Jaisinghani.

(An earlier version of this story has been corrected to show that Credit Suisse is trying to buy back debt.)

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