US futures remain stable after the Fed took steps to restore confidence in the banking system

HONG KONG/LONDON (CNN) US stock futures were steady on Monday after US financial regulators took an extraordinary step to restore confidence in the country’s banking system.

S&P 500 futures gave up overnight gains to trade flat, and Nasdaq futures were up 0.32% Monday morning. Dow futures, which were up in early morning trade, fell 0.28%.

On Sunday, the Biden administration pledged that customers of the failed Silicon Valley Bank (SVB) and Signature Bank would have access to all of their money starting Monday.

In a joint statement, U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corporation Chair Martin J. Gruenberg said the FDIC will unify SVB and Signature Bank customers as one .

In a similar move, the government shut down Signature Bank, a regional bank that has been on the brink of collapse in recent days.

By guaranteeing all deposits, even the uninsured money, that customers kept with banks, the government wanted to prevent further bank runs and help companies that deposited large sums of money with banks to continue to pay and fund their businesses.

The Federal Reserve will also provide additional funding to eligible financial institutions to prevent future runs on similar banks.

Investors around the world visibly breathed a sigh of relief after the announcement, according to Stephen Innes, managing partner of SPI Asset Management, who likened it to “Calvary” coming to the rescue.

“Cross-asset traders of all persuasions are sighing with relief as bank runs tend to take hold globally,” he told CNN.

“It’s not so much the risk of bank failures as investor fear that is contagious, so the backstop reduces investors’ panic mode.”

European stocks down

Intervention by US authorities to stem the fallout from the SVB collapse has done little to reassure investors across the pond.

European stocks were lower in early morning trade as the sell-off in bank stocks that began Thursday quickly continued.

Europe’s standard Euro Stoxx 600 (XXL) dropped 2.5% Monday morning, during London FTSE100 (UKX) 2.2% lost.

The Stoxx Europe 600 Banks Index, which tracks 42 major European banks fell 5%, marking its biggest decline since March 2021.

Shares fell despite an announcement of HSBC (FTRXX) Monday that it had bought SVB’s UK arm for £1 ($1.2) and said the company’s customers could “continue to bank as usual” and that their deposits were safe.

Shares of the FTSE-listed bank fell 3.5% in European trading.

Mixed Asian markets

Asia Pacific stocks were mixed as investors digested news of US regulatory efforts.

The losses were led by Japan’s benchmark Nikkei (N225) Index, which closed down 1.1%. South Korea kospi (COSPI) Initially falling in morning trade before reversing course to trade 0.7% higher. In Australia, the S&P/ASX 200 closed 0.5% lower.

In Hong Kong it is Hang Seng Index (HSI) closed up 2% while the Shanghai composition (SHCOMP) was 1.2% higher.

Innes attributed the mixed reaction to other factors weighing on markets, including a strong yen in Japan, which “is weighing on exporters” there, and continued uncertainty among global investors about the Fed’s interest rate policy.

Banking stocks in Asia were under pressure on Monday after their US and European counterparts faltered late last week.

Standard Chartered (SCBFF), which is headquartered in London but makes most of its money in Asia, fell 0.6% in Hong Kong. Singapore’s DBS, Southeast Asia’s largest lender, fell 0.8%.

US markets fell more than 3% on Thursday and Friday as investors feared more bank failures and systemic risks for the technology sector. For decades, the SVB was of enormous importance to the technology industry and specialized in the financing of start-ups.

“Following their sell-off on Friday, US stock market futures are currently looking positive,” wrote Robert Carnell, ING’s regional research director for Asia-Pacific, and Iris Pang, chief economist for Greater China, in a note to clients on Monday.

“So for now, it looks like the Fed’s quick action may have pre-empted a bigger problem.”

The SVB collapsed on Friday in a stunning and rapid turn of events. The massive tech lender faced liquidity problems that sparked a massive bank run that ultimately resulted in the second largest financial institution collapse in U.S. history.

Investor sentiment in Asia “will remain fragile in the short term amid concerns in the US banking sector,” Nomura analysts wrote in a report on Monday.

“In the very short term, the focus of the market is likely to remain on the consequences of the SVB failure.”

— David Goldman contributed to this report.