By Tom Westbrook
SINGAPORE, March 20 (Reuters) - Asian stocks steadied
and U.S futures rose on Monday in relief at a weekend rescue
deal for Credit Suisse and a concerted effort from central banks
to shore up the mood, though trade was tense and volatile as
contagion fears stalked financial shares.
S&P 500 futures rose 0.7% in bumpy trade and bonds
fell as investors reckoned less immediate fears of financial
instability reduced the likelihood of rate cuts later this year.
Beaten-down bank shares bounced 1% in Tokyo ,
while the broader Nikkei fell 0.2%. Financials in Australia fell 0.8% and the ASX 200 fell 0.5%.
In a little over a week, the fallout from the collapse of
Silicon Valley Bank - which has roiled confidence in the banking
system - has brought a globally systemic lender to its knees.
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, in a shotgun merger engineered by Swiss authorities.
Central banks including the Fed, the European Central Bank
and Bank of Japan pledged to deepen support for liquidity, by
increasing the frequency of seven-day dollar-swap operations
from weekly to daily.
"The best we can say was there are certainly a lot of
concerns about Credit Suisse contagion risk," said Rodrigo
Catril, a senior currency strategist at National Australia Bank
in Sydney.
"The news overnight from Switzerland has helped," he said,
though added that the central bank moves had also drawn
attention to how deep troubles may run.
"It's the irony of good news reflecting how bad things are.
It's great we're seeing this concerted effort from central
banks, and it's positive, but it does also highlight how
troubling the circumstances are and how worried central banks
appear to be as well."
The Asia day offered an encouraging start, with Japanese yen
cross-currency swaps , a measure of non-U.S. investor
demand for dollars, shrinking to minus 35 basis points or half
their levels last week, in another sign of respite in market
funding conditions.
Still, at least two major banks in Europe are examining
scenarios of contagion in the region's banking sector and are
looking to the Fed and the ECB for stronger signals of support,
two senior executives close to the discussions told Reuters.
Concern remains elevated, too, about regional banks in the
United States. On Sunday First Republic had its credit
rating pushed deeper into junk status by S&P Global and
elsewhere efforts to raise capital are hitting difficulties.
U.S. 10-year Treasury yields rose 9 bps to 3.49%
in Asia and 2-year yields rose 13 bps to 3.973%.
Interest rate futures pricing implies about a 60% chance
that the Fed hikes rates at its meeting later in the week, but
has also priced in several rate cuts by the end of the year.
In foreign exchange trade, the dollar was a little bit
softer on most majors. The euro rose 0.1% to $1.0682.
The safe-haven yen eased slightly to 132.39 per
dollar.
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(Reporting by Tom Westbrook; Editing by Sam Holmes and Stephen
Coates)
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