European stocks fell Friday, led lower by banks as investors continued to show concern over the stability of the financial sector. US equity futures erased gains. With a risk-averse mood spreading through markets, bonds and the dollar strengthened.
(Bloomberg) — European stocks fell Friday, led lower by banks as investors continued to show concern over the stability of the financial sector. US equity futures erased gains. With a risk-averse mood spreading through markets, bonds and the dollar strengthened.
The Stoxx Europe 600 Index slid for a second day, with a gauge of banks wiping out the last of its gains from earlier this week. Contracts on the S&P 500 edged lower and those on the Nasdaq 100 gave up an advance. Financials were among the worst-performing sectors on MSCI Inc.’s Asia-wide index.
UBS Group AG shares slumped as Bloomberg reported that it’s one of the banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter. The lender was also downgraded to hold from buy at Jefferies in the wake of its takeover of Credit Suisse Group AG.
Traders remained wary of problems in the banking sector that have built up during the Federal Reserve’s rapid hiking cycle. US lenders slumped Thursday even after Treasury Secretary Janet Yellen told lawmakers she was prepared for further steps to protect deposits if needed. A measure of US financial heavyweights sank to the lowest since November 2020.
Treasury yields fell and were well on course for a third day of declines. German and UK government bonds rallied.
The dollar headed higher after weakening in the previous six sessions. The yen advanced to the highest in six weeks, boosted by demand for haven assets.
Comments by Yellen about additional deposit actions, if warranted, offered investors comfort. Even so, they remain on guard to the risk of the economy going into reverse.
“We think that recession is a very likely prospect and that may very well turn the tables and see the Fed take a much more cautious approach, perhaps at the end of the year, opening the way for a rate cut,” Sue Trinh, co-head of global macro strategy at Manulife Investment Management, said on Bloomberg Radio. “Of course, the risk to that is that it takes longer for those cuts to manifest.”
Meanwhile, additional Tier 1 dollar notes issued by global lenders rebounded, climbing an average 2.7 cents on the dollar since Monday, according to data compiled by Bloomberg, which excludes Credit Suisse’s debt. They’re still down around 6 cents for all of March after the writedown of Credit Suisse’s AT1s.
In the commodity space, oil was steady and headed for a weekly gain amid concerns that the refilling of the US’s strategic crude inventories would take longer than previously expected. Gold declined.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US durable goods, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 1.3% as of 8:52 a.m. London time
- S&P 500 futures fell 0.4%
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.5%
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.5% to $1.0772
- The Japanese yen rose 0.6% to 130.04 per dollar
- The offshore yuan fell 0.7% to 6.8743 per dollar
- The British pound fell 0.4% to $1.2239
Cryptocurrencies
- Bitcoin fell 1% to $28,045.04
- Ether fell 1.3% to $1,795.95
Bonds
- The yield on 10-year Treasuries declined nine basis points to 3.34%
- Germany’s 10-year yield declined 12 basis points to 2.08%
- Britain’s 10-year yield declined 12 basis points to 3.25%
Commodities
- Brent crude fell 1.4% to $74.83 a barrel
- Spot gold fell 0.4% to $1,986.14 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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