SVB CRISIS MAY SEE MONEY MOVING TO LARGER BANKS, T-BILLS (0901 GMT) With faith in small U.S. financial firms dented by the collapse of start-up-focused lender SVB Financial, analysts at J.P.Morgan say that businesses might move their cash into larger, better capitalized and more liquids banks over time.
Big banks JPMorgan Chase, Citigroup and others are trying to accommodate customers wanting to move deposits quickly, the FT reports. Money market funds and Treasury bills will also likely see more inflows as businesses try to diversify liquidity, especially if deposits are over the Federal Deposit Insurance Corporation's (FDIC) limits, JPM says.
This should push down short rates, strapping them near the lower bound of the Fed funds target range, JPM notes.
(Aniruddha Ghosh)
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EUROPE EYES TENTATIVE STABILISATION AFTER TWO-DAY ROUT (0731 GMT) European index futures wavered around parity before the cash market open, pointing to a tentative stabilisation following a two-day rout that erased part of this year's rally for the STOXX 600 and wiped off almost 100 billion euros in market cap from the region's bank index . EuroSTOXX50 and FTSE futures were both last around 0.2%, while S&P 500 contracts inched up 0.3%. U.S. regional bank First Republic Bank's Frankfurt-listed shares rose more than 20% in thin early morning trading. Needless to say, that sentiment remained fragile as investors continue to assess the broader implications from the collapse of Silicon Valley Bank and Signature Bank (SVB ) that prompted the U.S. government to take steps to shore up systemic confidence. Eyes later in the day will be on U.S. inflation data coming just as markets are undergoing a massive repricing of the interest rate outlook in the world's biggest economy.
Turning to European corporate news, banks remain in sharp focus. Credit Suisse said customer "outflows stabilized to much lower levels but had not yet reversed. HSBC was seen falling another 2% on news it would inject 2 billion pounds of liquidity into the UK unit of SVB. Shoemaker Tod's , insurer Generali and airport operator Flughafen Zurich were all seen rising following their latest earnings reports. Banking company Close Brothers and chemicals maker Wacker Chemie were instead called lower following results.
(Danilo Masoni)
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READY OR NOT! HERE COMES US INFLATION DATA (0650 GMT) Investors are struggling to find their risk appetite this week, with markets jittery in the wake of the stunning collapse of Silicon Valley Bank and measures by U.S. authorities to stem contagion risks.
And yet, global banking stocks have been brutally hit, with Japanese banks sinking to their lowest in nearly three months on Tuesday. The dollar remains pinned near a one-month low, while oil prices fell more than $1 and MSCI ex-Japan index languishing at more than two month lows. And while the two-year U.S. Treasury yield was up 16 basis points at 4.109% on Tuesday, it remained far off last week's high of 5.085%.
All of that means that the market is ready to believe the Fed may just stay pat and not hike next week, with peak rates not far off. Traders are even pricing in rate cuts by the end of the year, a far cry from expectations last week of interest rates staying above 5% through 2023.
The tentativeness might not pass through to Europe, though, as futures indicate stocks might be in for a higher open. Whether they sustain any gains remains to be seen. Investors will be keen to see if the worst is over for European banking stocks, with eyes on the STOXX banking index, which clocked its biggest one-day percentage drop in a year on Monday.
The spotlight will be firmly on U.S. inflation data for February, due later in the day, when consumer prices are seen to have risen at a solid pace, but economists are divided on whether the data will be enough to push the Fed Reserve to hike rates again next week.
Key developments that could influence markets on Tuesday:
Economic events: CPI data from Netherlands, Finland, Spain and the United States
(Ankur Banerjee)
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