Tentative Calm Returns Ahead of Payrolls Report: Markets Wrap

US equity futures steadied on Friday from the previous day’s sharp selloff, a sign that worries about the wider banking industry could be easing and investors’ focus is turning to crucial jobs data due later.

(Bloomberg) — US equity futures steadied on Friday from the previous day’s sharp selloff, a sign that worries about the wider banking industry could be easing and investors’ focus is turning to crucial jobs data due later.

Shares of US banks including JPMorgan Chase & Co, Wells Fargo & Co. and Bank of America Corp., traded about half a percent lower in New York premarket trading, trimming earlier hefty losses. Futures on the S&P 500 traded flat while those on the Nasdaq flipped to gains. However, SVB Financial, which sparked the turmoil with a share sale to shore up losses, extended a slump, tumbling as much as 45% premarket.

European bank shares also slightly pared losses, after an earlier 5% slump.

Troubles at Silvergate Capital Corp. and SVB Financial Group highlight the impact of relentless Federal Reserve policy tightening on financial sector balance sheets. It has caused money markets to trim their bets on a bigger half-point rate hike at the Fed’s March 21-22 meeting.  However, investors see the problems as unlikely to spark wider ripples across the financial sector and the economy.

“Our initial take would be that this is unlikely to ensnare the important banks,” said Mark Haefele, CIO at UBS Wealth management. “The main focus is on what the Fed does. The jobs data and CPI data are going to influence that.”

Investors have dashed for the safety of bonds however, sending benchmark 10-year Treasury yields down about seven basis points to about 3.83%, well off the psychologically key 4% mark reached on Thursday. Two-year yield dropped about 9 basis points, heading for the biggest two-day drop since June. 

Investors say US monthly payrolls number may re-chart the path of Federal Reserve rate increases. 

Economists project a 225,000 increase in February payrolls, about half January’s blockbuster pace, and a softer number could further tilt expectations back to a quarter-point hike. Investors reckon the jobs picture will play a bigger role in the Fed’s policy considerations, given most recent data shows the labor picture remains robust. 

“For the Fed these ripples across the financial system will be something to monitor but they are much more focused on their inflation mandate,” said Georgina Taylor, head of multi-asset at Invesco. 

“A strong set of data “will keep pressure on the Fed,” she added.

The switch-off in risk sentiment and the wind-down of crypto-friendly Silvergate put bitcoin on track for its worst week since November. A Bloomberg commodity index has lost more than 4% this week, while oil is headed for its biggest weekly loss since early February.

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 7:56 a.m. New York time
  • Nasdaq 100 futures rose 0.1%
  • Futures on the Dow Jones Industrial Average fell 0.2%
  • The Stoxx Europe 600 fell 1.2%
  • The MSCI World index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%
  • The euro rose 0.1% to $1.0595
  • The British pound rose 0.6% to $1.1999
  • The Japanese yen fell 0.4% to 136.65 per dollar

Cryptocurrencies

  • Bitcoin fell 1.3% to $19,971.53
  • Ether fell 2.4% to $1,398.41

Bonds

  • The yield on 10-year Treasuries declined nine basis points to 3.82%
  • Germany’s 10-year yield declined 14 basis points to 2.51%
  • Britain’s 10-year yield declined 12 basis points to 3.68%

Commodities

  • West Texas Intermediate crude fell 0.7% to $75.19 a barrel
  • Gold futures rose 0.3% to $1,840.50 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jan-Patrick Barnert.

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