NNA - Futures and Asian stocks fought to stablise though banks remained under pressure on Monday as a rescue deal for Credit Suisse and a concerted effort by central banks to restore confidence eased immediate fears of contagion.
European futures rose 0.5% and S&P 500 futures rose 0.4% in bumpy trade. FTSE futures rose 0.3%. In cash trading a bounce for banks in Tokyo retraced and most markets in Asia lost ground.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%.
While the volatility has subsided for now, investors remained fearful about what could happen next after a week in which a systemic lender in one of Europe’s financial capitals was brought to its knees by the turmoil in the bond market resulting from the collapse of Silicon Valley Bank.
Over the weekend, UBS said it will buy Credit Suisse for 3 billion francs ($3.2 billion) and assume up to $5.4 billion in losses, a shotgun merger engineered by Swiss authorities that investors hope can head off an even bigger mess in global markets.
“The market’s taken a positive view that that’s one area of concern that’s been cauterized,” said Jason Wong, a senior strategist at BNZ in Wellington.
“But it doesn’t solve the U.S.-banking specific issues, where deposits are going out the door into safer banks,” he said.
“We’ve got to get confidence back into that banking sector, and probably more needs to be done or a week from now we’ll still be facing the same sorts of issues.”
Central banks including the U.S. Federal Reserve, the European Central Bank and Bank of Japan on Sunday pledged support for market liquidity by increasing the frequency of seven-day U.S. dollar-swap operations from weekly to daily.
The BOJ said there were no bids for dollars during its operation on Monday, potentially a positive sign if it signals there isn’t urgent demand.
The central banks’ assurances were enough to steady selling without reversing it.
Japan’s Nikkei fell 0.4% and the Hang Seng fell 0.9%, with Hong Kong financials down 1%. Financials in Australia fell 0.7%.
U.S. Treasuries were sold too, to wind back some of last week’s wild rally. Dealers said the outlook remains clouded by the fragility of banking confidence.—Reuters
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