Stocks tumbled and Treasuries rallied amid mounting concerns about the health of the US banking system. Nasdaq futures pared losses in early trading.
(Bloomberg) — Stocks tumbled and Treasuries rallied amid mounting concerns about the health of the US banking system. Nasdaq futures pared losses in early trading.
Europe’s Stoxx 600 equity gauge dropped 1.7%, with an index of bank stocks sliding the most since June, led by a 7% plunge for Deutsche Bank AG. Credit Suisse Group AG shares tumbled to a record low, and HSBC Holdings Plc was down more than 5%.
Contracts on the S&P 500 index lost 0.4%. Shares in SVB Financial, which sparked the turmoil with a share sale to shore up losses, extended a slump in US premarket trading, tumbling as much as 22%. Shares of larger banks including JPMorgan Chase & Co, Wells Fargo & Co. and Bank of America Corp. slipped more than 1%. Contracts on the Nasdaq 100 were little changed.
As investors dashed for safety, Treasury yields fell, with the two-year segment slipping to 4.75% and heading for its biggest two-day slide since last June. Ten-year benchmark yields were down about eight basis points. Still to come on Friday is the key US monthly payrolls number, which may re-chart the path of Federal Reserve rate increases.
“The events around SVB highlight some of the additional risks of financial stress,” said Sarah Hewin, senior economist at Standard Chartered Bank in London. “There is a sense now of the bigger risks to the economy the more the Fed raises interest rates. At the margins it is raising the question of whether the Fed will indeed be able to do a 50 basis-point rate hike this month.”
The rout came after Silvergate Capital Corp. collapsed as the crypto industry’s meltdown sapped its financial strength, while SVB’s troubles prompted Peter Thiel’s Founders Fund and other prominent venture capitalists to advise portfolio businesses to withdraw their money, Their woes highlight the impact of relentless Fed policy tightening on the financial sector as soaring rates erode balance sheets.
Money markets have already scaled back bets the Fed would opt for a half-point hike at its March 21-22 meeting to about an even chance, having earlier priced a 75% likelihood. Data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly swelled to the highest this year.
That set the stage for Friday’s monthly jobs report. 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.
However, the Fed will have to position to “potentially raise by a half a percentage point very quickly” if the payrolls data come in hotter than expected, Danielle DiMartino Booth, chief executive officer and chief strategist at Quill Intelligence, said on Bloomberg Television.
In currency markets, the dollar stayed flat against a basket of currencies, while the yen retreated after the Bank of Japan kept monetary settings unchanged at Governor Haruhiko Kuroda’s final policy meeting. The pound firmed after data showing the UK economy had bounced back in January.
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.
Key events this week:
- US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.4% as of 4:25 a.m. New York time
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average fell 0.6%
- The Stoxx Europe 600 fell 1.6%
- The MSCI World index fell 0.6%
- S&P 500 futures fell 0.4%
- Nasdaq 100 futures fell 0.1%
- The MSCI Asia Pacific Index fell 2%
- The MSCI Emerging Markets Index fell 1.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0586
- The British pound rose 0.2% to $1.1948
- The Japanese yen fell 0.4% to 136.75 per dollar
- The offshore yuan was little changed at 6.9701 per dollar
Cryptocurrencies
- Bitcoin fell 1.6% to $19,911.73
- Ether fell 1.9% to $1,405.35
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.83%
- Germany’s 10-year yield declined 12 basis points to 2.53%
- Britain’s 10-year yield declined 11 basis points to 3.69%
Commodities
- West Texas Intermediate crude fell 0.7% to $75.20 a barrel
- Gold futures rose 0.3% to $1,839.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Akshay Chinchalkar and Tassia Sipahutar.
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