Early gains for US equity futures evaporated as markets remained on edge, with investors weighing the risk of recession and its impact on interest rates while keeping an eye on the troubled banking sector.
(Bloomberg) — Early gains for US equity futures evaporated as markets remained on edge, with investors weighing the risk of recession and its impact on interest rates while keeping an eye on the troubled banking sector.
Contracts on the S&P 500 were little changed while those on the Nasdaq 100 slipped. The Treasury 10-year yield was little changed after rising about four basis points earlier, and the more rate-sensitive two-year rate held near a six-month low. A gauge of dollar strength was steady.
The Stoxx Europe 600 index pared an advance of more than 1% at the open, with a gauge of bank stocks climbing after a relatively uneventful weekend for the sector. Shares of Deutsche Bank AG and Credit Suisse AG were steady after last week’s steep losses. Novartis AG surged, dragging healthcare peers higher, after promising trial results for a cancer drug.
Traders are in for another bumpy week, with developments in the banking sector closely watched. On top of that, multiple Federal Reserve officials will speak, a key measure of US inflation is due and there are renewed geopolitical tensions with Russia to station tactical nuclear weapons in Belarus. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.
“Fedspeak 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. Yet investors in the bond market already see the wider damage in the sector running its course. They 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.
In the US stock market Friday, after a slide that reached 1% in the first hour of trading, the S&P 500 snapped back and notched its second straight week of gains. A gauge of US financial heavyweights climbed from its lowest level since November 2020.
Top US regulators said after a meeting Friday that while some banks are coming under stress, the overall financial system is still sound. First Citizens Bank & Trust on Monday agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after it was seized by the regulators.
Investors will be closely watching data on 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, oil was slightly higher after a weekly gain. Gold hovered around $1,972 an ounce after rising last week to a one-year high.
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
- The Stoxx Europe 600 rose 0.6% as of 8:57 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.6%
- The MSCI Emerging Markets Index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0751
- The Japanese yen fell 0.2% to 130.97 per dollar
- The offshore yuan fell 0.3% to 6.8875 per dollar
- The British pound was little changed at $1.2235
Cryptocurrencies
- Bitcoin was little changed at $27,823.91
- Ether fell 0.5% to $1,752.75
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.40%
- Germany’s 10-year yield advanced three basis points to 2.16%
- Britain’s 10-year yield advanced three basis points to 3.32%
Commodities
- Brent crude rose 0.5% to $75.34 a barrel
- Spot gold fell 0.4% to $1,970.74 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Tassia Sipahutar.
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