(Bloomberg) — U.S. stock futures rose more than 1% and the dollar fell against major peers Monday, as traders processed moves regulators had taken to support the U.S. financial sector in the wake of Silicon Valley Bank’s bankruptcy.
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Treasury Secretary Janet Yellen said her office would protect “all depositors” at the bank, whose demise on Friday marked the biggest such event since 2008. uninsured deposits in the broader US banking system.
Two-year Treasury yields contributed to their sharp decline last week, falling as much as 15 basis points before the move was flattened amid bets on slower rate hikes by the Fed. Yields over the 10-year term have increased slightly.
Australian and New Zealand government bond yields plummeted as traders around the world reassess the course of interest rate hikes and the economic costs already incurred by the tightening cycle. Japan’s 10-year benchmark interest rate also fell. The problems at the bank of SVB Financial Group were largely caused by the consequences of higher US interest rates.
“Cramping monetary cycles often end abruptly when ‘something breaks’ and a financial crisis erupts,” Ed Yardeni, the founder of Yardeni Research, said in a note. “If the Silicon Valley Bank run is anything to go by, it could mean that tightening is ending sooner and that bond yields have peaked. We can’t say for sure that this is the case, but we can say that the debacle should keep the technology sector in its rolling recession for longer.”
An Asian stock index was set to its lowest closing price since early January. Japanese equities led the region’s losses, with financials being the biggest drag on the benchmark Topix gauge. The index headed for its biggest two-day loss in a year as the yen continued to rise.
Meanwhile, stocks in Hong Kong and mainland China rose amid positive signs for policy continuity, with China’s central bank governor Yi Gang and finance and trade ministers kept in their posts. President Xi Jinping, in his closing address at the National People’s Congress, also pledged to pursue reasonable growth in the economy, as well as self-reliance on technology.
Monday’s market moves come after risky assets ran into trouble last week, with the US equity benchmark experiencing its worst week since September. Wall Street’s so-called “fear gauge” peaked, with the Cboe Volatility Index reaching its highest this year. Two-year government bond yields plunged 28 basis points to 4.59%.
Concerns about this week’s consumer price index report are also high, especially after Fed Chairman Jerome Powell recently stressed that a move to a faster pace of tightening would be based on the “totality of the data.”
But for now, reassurances from US regulators about SVB are having the desired effect.
“This will restore confidence in the markets. But from the Fed’s point of view, there are additional dangers that need to be looked at, which will take some time,” Pepper International’s Carol Pepper said on Bloomberg TV. “So I hope this will help them have a good reason to pause because frankly, creating financial stability is the most important job at the Fed.”
Elsewhere in the markets, oil reversed previous gains, while gold rose on its appeal as a haven. Bitcoin climbed, reflecting investor relief.
Main events this week:
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China Retail Sales, Industrial Production, Medium-Term Loans, Unemployment Rate Surveyed, Wednesday
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Eurozone industrial production, Wednesday
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US corporate inventories, retail sales, PPI, imperial manufacturing, Wednesday
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Eurozone tariff decision, Thursday
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US housing starts, first jobless claims, Thursday
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Janet Yellen will appear before the Senate Finance Committee on Thursday
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US University of Michigan Consumer Confidence Industrial Production Leading Index Conference Board, Friday
Some of the major moves in markets:
Shares
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S&P 500 futures were up 1.2% as of 11:09 a.m. Tokyo time. The S&P 500 fell 1.5% on Friday
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Nasdaq 100 futures rose 1.2%. The Nasdaq 100 fell 1.4%
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Japanese Topix index fell 2.1%
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Hong Kong’s Hang Seng index rose 0.8%
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China’s Shanghai Composite Index rose 0.3%
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The Australian S&P/ASX 200 index fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index fell 0.4%
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The euro rose 0.3% to $1.0676
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The Japanese yen rose 0.4% to 134.55 per dollar
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The offshore yuan rose 0.3% to 6.9169 per dollar
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The Australian dollar rose 0.6% to $0.6618
Cryptocurrencies
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Bitcoin rose 4.8% to $22,528.72
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Ether rose 3.6% to $1,613.43
Bonds
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The 10-year Treasury yield rose two basis points to 3.72%
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Japanese 10-year yields fell 6.5 basis points to 0.33%
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Australian 10-year yields fell eight basis points to 3.50%
Raw materials
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West Texas Intermediate crude fell 0.3% to $76.48 a barrel
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Spot gold rose 0.4% to $1,875.37 an ounce
This story was created with the help of Bloomberg Automation.
–With help from Vildana Hajric and Isabelle Lee.
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