Thursday, July 25, 2024

Stock futures are higher on Credit Suisse buys

SINGAPORE, March 20 (Reuters) – U.S. stock futures edged higher in Asian trade on Monday on a weekend recovery deal for Credit Suisse, even as sentiment eased and financial stocks were pressured by contagion fears, even with support from global central banks. .

S&P 500 futures rose 0.5% in flat early trade. Japan’s Nikkei futures rose 0.6%.

Currency markets were broadly flat, while U.S. interest rate futures fell, as investors slightly raised U.S. interest rate expectations ahead of Wednesday’s Federal Reserve meeting.

US Treasury futures fell and early indicators pointed to a volatile day for bonds.

In equities, the S&P ASX 200 ( .AXJO ) fell 0.8% in morning trade, while the financial index ( .AXFJ ) fell 1.4%, led by falls in Australian banking shares.

In a week, the fallout from the collapse of the Silicon Valley bank — which has undermined confidence in the banking system — has brought the world’s largest formal lender to its knees.

Over the weekend, UBS said it would buy Credit Suisse for 3 billion francs ($3.2 billion) and lose up to $5.4 billion in a shotgun merger designed by Swiss authorities.

Central banks, including the European Central Bank and the Bank of Japan, pledged to deepen support for liquidity, increasing the frequency of seven-day dollar swap operations to a daily weekly basis.

“The best thing we can say is that there is certainly a lot of concern about Credit Suisse contagion risk,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

“The overnight news from Switzerland helped,” he said, though the central bank moves calmed and created nerves.

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“It’s the paradox of good news reflecting how bad things are. It’s great to see this concerted effort by central banks, and that’s positive, but it also highlights how complicated the situation is and how worried central banks are.”

At least two of Europe’s biggest banks are examining the pandemic situation in the region’s banking sector and are looking to the central bank and the ECB for signals of stronger support, two senior executives close to the discussions told Reuters.

Concerns about regional banks in the United States also remain high. First Republic ( FRC.N ) had its credit rating pushed deeper into junk status by S&P Global on Sunday and efforts to raise capital elsewhere are hitting difficulties.

U.S. 10-year Treasury June futures fell 19 ticks in early trade as investors tried to gauge what moves to curb bank wobbles to global interest rates.

Pricing indicates a 60% chance the central bank will raise rates at a meeting later in the week, but pricing has also priced in several rate cuts later in the year.

In foreign exchange trade, the Swiss franc rose about 0.4% to 0.9264 against the dollar as concerns about Credit Suisse grew last week.

The yen was steady at 131.87 per dollar. The euro rose 0.1% to $1.1067.

Report by Tom Westbrook; Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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