US futures rose with European stocks as the prospect of further support from US authorities eased some concerns over the troubled regional banking sector.
(Bloomberg) — US futures rose with European stocks as the prospect of further support from US authorities eased some concerns over the troubled regional banking sector.
Contracts on all three major U.S. gauges advanced. First Republic Bank shares jumped 27%, pacing gains in regional peers, after Bloomberg reported that US authorities are considering expanding an emergency lending facility that would give the lender more time to boost its balance sheet. First Citizens BancShares Inc. rallied 40% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank.
The Treasury 10-year yield rose about nine basis points. A gauge of dollar strength was steady. European equities climbed, with a gauge of bank stocks outperforming. Deutsche Bank AG rebounded, while Credit Suisse AG was higher after last week’s steep losses.
Traders are in for another bumpy week: developments in the banking sector will be closely watched, while remarks from multiple Federal Reserve officials and data on a key US inflation measure are also due. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.
“Fed speak should once more garner attention as markets assess how officials balance the ongoing banking sector stress against still-high inflation,” said Eddie Cheung, a senior strategist at Credit Agricole CIB. “Some early indications over the weekend point to a softening in hawkish language and a lowering in rate expectations. Meanwhile, market sentiment is likely to remain fragile.”
Authorities are said to be considering expanding an emergency lending facility for US banks in ways that would give First Republic Bank more time to shore up its balance sheet. Still, investors in the bond market piled into wagers last week that a recession is around the corner, axing bets on any further tightening and ramping up bets for rate cuts.
The next risk to equities will likely come from earnings, according to Morgan Stanley’s Michael Wilson — among the most prominent bearish voices on US stocks.
“Given the events of the past few weeks, we think guidance is looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes,” Wilson wrote in a note on Monday.
Investors will be closely watching data on the personal consumption expenditures price index, which is the Fed’s preferred measure of underlying price pressure, that will come out later this week for direction on the US central bank’s rate path.
Elsewhere, European Central Bank Executive Board member Isabel Schnabel pushed for this month’s decision statement to signal possible interest-rate hiking in future, according to people with knowledge of the matter.
In a further indication of risk-on sentiment, oil rose and gold slipped.
Key events this week:
- US wholesale inventories, US Conf. Board consumer confidence, Tuesday
- EIA Crude Oil Inventory Report, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.6% as of 8:18 a.m. New York time
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 rose 1.2%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0772
- The British pound rose 0.2% to $1.2262
- The Japanese yen fell 0.6% to 131.57 per dollar
Cryptocurrencies
- Bitcoin rose 0.3% to $27,880.88
- Ether rose 0.2% to $1,766.1
Bonds
- The yield on 10-year Treasuries advanced nine basis points to 3.47%
- Germany’s 10-year yield advanced 11 basis points to 2.24%
- Britain’s 10-year yield advanced 11 basis points to 3.40%
Commodities
- West Texas Intermediate crude rose 1.6% to $70.35 a barrel
- Gold futures fell 1.5% to $1,971.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Tassia Sipahutar and Sagarika Jaisinghani.
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