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Asian stock markets :
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U.S. authorities act to stabilise banks
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Markets speculate on less aggressive Fed hikes
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Short-term Treasury yields fall, Fed futures jump
By Wayne Cole
SYDNEY, March 13 (Reuters) - U.S. stock futures rallied
in Asian trade on Monday as authorities announced plans to limit
the fallout from the collapse of Silicon Valley Bank (SVB),
while investors wagered a rate hike this month was no longer a
certainty.
Most Asian share markets were modestly in the red led by
financial stocks, while the dollar dipped as short-term Treasury
yields extended their steep decline.
In a joint statement, the U.S. Treasury and Federal Reserve
announced a range of measures to stabilise the banking system
and said depositors at SVB would have access to their
deposits on Monday.
The Fed said it would make additional funding available
through a new Bank Term Funding Program, which would offer loans
up to one year to depository institutions, backed by Treasuries
and other assets these institutions hold.
The moves came as authorities took possession of New
York-based Signature Bank , the second bank failure in a
matter of days.
Analysts noted that, importantly, the Fed would accept
collateral at par rather than marking to market, allowing banks
to borrow funds without having to sell assets at a loss.
"These are strong moves," said Paul Ashworth, head of North
American economics at Capital Economics.
"Rationally, this should be enough to stop any contagion
from spreading and taking down more banks, which can happen in
the blink of an eye in the digital age," he added. "But
contagion has always been more about irrational fear, so we
would stress that there is no guarantee this will work."
Investors reacted by sending U.S. S&P 500 stock futures up 1.4%, while Nasdaq futures rose 1.5%.
EUROSTOXX 50 futures and FTSE futures were both
little changed with markets wary of more volatility.
MSCI's broadest index of Asia-Pacific shares outside Japan crept up 0.3% as investors pondered the
consequences for regional markets.
Japan's Nikkei fell 1.6% in choppy trade, while
South Korea lost 0.5%.
Chinese blue chips added 0.1% after Beijing
surprised by keeping the head of the central bank and finance
minister in their posts on Sunday, prioritising continuity as
economic challenges loom at home and abroad.
A NEW HEADACHE FOR THE FED Such was the concern about financial stability, that investors speculated the Fed would now be reluctant to rock the boat by hiking interest rates by a super-sized 50 basis points this month. Fed fund futures surged in early trading to imply only a 17% chance of a half-point hike, compared with around 70% before the SVB news broke last week. The peak for rates came all the way back to 5.14%, from 5.69%, last Wednesday, and markets were even pricing in rate cuts by the end of the year. "In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22," wrote analysts at Goldman Sachs. "We have left unchanged our expectation that the FOMC will deliver 25bp hikes in May, June, and July and now expect a 5.25-5.5% terminal rate, though we see considerable uncertainty about the path." Such talk, combined with the shift to safety, saw yields on two-year Treasuries fall a further 12 basis points to 4.46%, a world away from last week's 5.08% peak. Longer-dated yields , however, climbed and the curve steepened as inflation remained a clear concern. Much will depend on what U.S. consumer price figures reveal on Tuesday, with an obvious risk that a high reading will pile pressure on the Fed to hike aggressively even with the financial system under strain. The European Central Bank meets on Thursday and is still widely expected to lift its rates by 50 basis points and to flag more tightening ahead, though it will now have to take financial stability into account. In currency markets, the dollar dipped 0.6% on the safe-haven Japanese yen to 134.20 , though that was off its early low.
The dollar eased 0.4% on the Swiss franc , while the euro firmed 0.5% to $1.0696 as short-term U.S. yields dropped. Gold climbed 0.6% to $1,879 an ounce , having jumped 2% on Friday. Oil prices edged lower, with Brent down 24 cents at $82.54 a barrel, while U.S. crude fell 14 cents to $76.54 per barrel. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets Asia-Pacific valuations ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Wayne Cole; Editing by Diane Craft and Sam Holmes)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))