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European stocks rise in early European trading
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ECB delivered 50bp increase, dropped forward guidance
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First Republic Bank gets $30 bln injection, worries linger
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Fed data showed banks sought record emergency liquidity
(Updates throughout)
By Elizabeth Howcroft
LONDON, March 17 (Reuters) - European stock indexes rose
in early trading on Friday, extending a recovery from the
previous day as fears about a banking crisis eased slightly
after top U.S. authorities and banks took action to rescue First
Republic Bank.
In a crisis beginning with the collapse of U.S.-based
Silicon Valley Bank last Friday, risk appetite plunged earlier
in the week as investors lost confidence in regional banks in
the U.S. and Credit Suisse in Europe. The tumultuous week saw
bond yields plunge as investors lowered their expectations for
future rate rises.
Global markets stabilised somewhat on Thursday, helped by
Credit Suisse saying it would borrow up to 50 billion Swiss
francs ($54 billion) from the Swiss National Bank and, later in
the day, a group of major banks injecting $30 billion in
deposits into First Republic Bank, a mid-sized U.S. lender.
Still, analysts say the worry about a possible banking
crisis is far from over.
Credit Suisse's chief executive said on Friday the bank was
working hard to stem customers outflows, although this could
take time.
At 0944 GMT, the MSCI world equity index, which tracks
shares in 47 countries, was up 0.4% on the day.
Europe's STOXX 600 was up 0.7%, but still down 1.9% on the
week overall .
London's FTSE 100 was up 0.9% .
The U.S. 2-year Treasury yield, which is the most sensitive
to shifts in interest rate expectations, was up 2 basis points
on the day at 4.1384% - still closer to Wednesday's
six-month low of 3.72% than the peak of 5.084% it hit the
previous week, which had been its highest since 2007.
The European Central Bank raised rates by 50 bps on
Thursday, sticking to its pledge to fight inflation even as some
investors called for a pause in the rate-hiking cycle until the
banking turmoil eases.
The central bank's supervisory board met on Friday to
discuss stress and vulnerabilities in the euro zone banking
sector.
The benchmark German 10-year yield was steady at around
2.255% , and short-dated euro zone government bond
yields rose.
Markets are pricing in a 25 bps increase by the U.S. Federal
Reserve when it meets next week, down from previous expectations
for a 50 bps increase.
Fed data on Thursday showed that banks sought record amounts
of emergency liquidity in recent days, which in turn helped undo
months of central bank effort to shrink the size of its balance
sheet.
"The fact that the Fed has been very proactive in terms of
opening the liquidity tap is potentially useful and that’s
stabilised things in the short term at least," said Guillaume
Paillat, multi-asset portfolio manager at Aviva Investors.
"It’s potentially a more stable environment, because it
feels like we’ve passed the crisis point and things should
normalise a bit."
Against a basket of currencies, the U.S. dollar was down
0.3% . The Australian dollar, seen as a liquid proxy for
risk appetite, was up 0.7% on the day at $0.6705 .
The British pound was up 0.2% and the euro was up
0.3% .
Oil prices also benefited from the resurgence of risk
appetite, with Brent crude futures up 1.2% and U.S. West
Texas Intermediate crude up 1.5% , recovering after having
hit their lowest in more than a year earlier in the week.
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(Reporting by Elizabeth Howcroft; editing by Robert Birsel)
