The turmoil in global financial markets eased Thursday after regulators threw a lifeline to Credit Suisse Group AG, though signs of unrest persisted as volatility gauges remained elevated and overnight gains in US futures evaporated ahead of the European Central Bank’s rate decision.
(Bloomberg) — The turmoil in global financial markets eased Thursday after regulators threw a lifeline to Credit Suisse Group AG, though signs of unrest persisted as volatility gauges remained elevated and overnight gains in US futures evaporated ahead of the European Central Bank’s rate decision.
European stocks edged higher and Credit Suisse rallied the most in history at the open, powering a gauge of bank stocks to a gain of more than 1% after the embattled Swiss lender arranged to borrow as much as 50 billion francs ($54 billion) from a Swiss National Bank liquidity facility. US stock futures were little changed. Regional banks in the S&P 500 index clung to gains, though remain sharply lower for the week. The Cboe Volatility Index edged up to 27, well above its long-term average of 20.
Treasuries were lower in early trading, sending the two-year yield back to 4% after historically steep declines in recent days. Bond across Europe declined, with the German 10-year yield up 15 basis points. An index of the dollar slipped. The Swiss franc strengthened after a sharp selloff Wednesday. The euro recovered from a two-month low ahead of an expected interest rate increase from the ECB later Thursday, with more investors now positioning for a 25 basis point move after earlier expectations for double that.
“ECB policy makers will be grappling with the risk that sticking to the original plan to hike 50 basis points could further undermine confidence,” said Sarah Hewin, head of Europe and Americas research at Standard Chartered Plc. “Not tightening policy could be read by the market as an admission of underlying vulnerabilities.”
The banking sector turmoil — which kicked off last week after the failure 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 the Federal Reserve’s policy meeting next week, with traders almost evenly split on whether the central bank will increase interest rates. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.
“Uncertainty is very high at the moment and there’s a lot of selling because of the shock from higher volatility and other factors,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The change in focus from inflation to growth concerns and financial stability has reversed the stock-bond correlation again. A stronger relief rally is not likely to happen before the Fed meeting.”
Elsewhere in markets, oil hovered near the lowest close in 15 months after a three-day rout started by the US banking crisis and accelerated by options covering. Gold held near a six-week high.
Key events this week:
- Eurozone rate decision, Thursday
- US housing starts, initial jobless claims, Thursday
- Janet Yellen appears before the Senate Finance Committee, Thursday
- US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:20 a.m. New York time
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index was little 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 rose 1.9% to $24,859.83
- Ether rose 0.6% to $1,663.68
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.50%
- Germany’s 10-year yield advanced 16 basis points to 2.29%
- Britain’s 10-year yield advanced 10 basis points to 3.42%
Commodities
- West Texas Intermediate crude rose 1% to $68.28 a barrel
- Gold futures fell 0.3% to $1,926 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Sujata Rao and Sagarika Jaisinghani.
(An earlier version of this story was corrected to show that Credit Suisse is seeking to buy back debt.)
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