But even as jitters about the state of small and
medium-sized U.S. banks persist, amid fears for ongoing deposit
flight, global markets appeared to breathe a collective sigh of
relief on Tuesday that the larger core banks in the United
States and Europe look strong enough to weather the storm.
They were less sure how an inevitable tightening of business
and household credit, amid higher bank funding costs related to
the fracture, affects the wider economy. And for that they look
to this week's two-day meeting of the Federal Reserve that
begins on Tuesday and the Bank of England equivalent on
Thursday.
With Wall St stocks pushing higher again on Monday,
European bourses followed suit for a second
day. Crucially, euro zone bank stocks also rallied for a
second day and were up almost 4% early on Tuesday - following
losses of up to 20% over the turbulent two weeks.
UBS was also up almost 4% and there were gains in
many so-called AT1 bonds - junior bank debt at the eye of the
Credit Sussie workout storm as investors in these bonds were
wiped out even as shareholders got something from the UBS deal.
As the relative calm across banking stocks and bonds seemed
to hold, interest rate markets readjusted and focused squarely
on Wednesday's Fed decision.
Futures markets that had only 24 hours ago doubted the Fed
would hike rates again in this cycle, now see an 80% chance of
another quarter point rate rise this week. They still price up
to half a point of rate cuts from there to year-end, although
that's half of what was priced early on Monday.
There's a 50% chance of a Bank of England rate rise this
week now in money market pricing.
Wildly volatile U.S. Treasury markets also appeared to find
a level, with 2-year Treasury yields climbing back above 4% from
as low as 3.63% yesterday.
As a measure of the gyrations in bond pricing, a key gauge
of Treasury market volatility climbed again on Monday
and remains well in excess of the even the worst moments of the
pandemic hit three years ago.
The MOVE has recorded its biggest monthly rise since the
banking crash of 2008 and is more than twice the average level
of the last 20 years.
Elsewhere, a refocus on the underlying economy will see a
fresh look at the U.S. housing sector, while another round of
job cuts among Big Tech companies emerged with thousands of
layoffs at Amazon.
In politics, New York City braced for a possible indictment
of Donald Trump over an alleged hush-money payment to porn star
Stormy Daniels during the former President's 2016 election
campaign.
Russian President Vladimir Putin and Chinese leader Xi
Jinping were to hold further talks on Tuesday amid Western
criticism that Xi's visit was giving a boost to Moscow as it
struggles to make ground in its year-long war on Ukraine.
Key developments that may provide direction to U.S. markets
later on Tuesday:
* U.S. Feb existing home sales, Philadelphia Federal Reserve's
March services survey; Germany's March ZEW investor sentiment;
Canada Feb consumer price inflation
* Fed's Federal Open Market Committee starts two-day meeting on
interest rates (to Mar. 22)
* U.S. Treasury auctions 20-year bond
* US corporate earnings: Nike
* Britain's finance minister Jeremy Hunt testifies to parliament
* European Central Bank President Christine Lagarde speaks in
Basel, ECB Chair of Supervisory Board Andrea Enria in Brussels
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Market fallout of a banking crisis Meta has cut nearly a quarter of its employees Over $95 billion in market value wiped out in 2 weeks Tighter business credit conditions ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Mike Dolan, editing by XXXX mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
A look at the day ahead in U.S. and global markets from Mike
Dolan
No news appears to be good news for now as two weeks of bank
failures and stress make way for a nervy examination of
portfolios for damage while central banks judge whether the
episode should affect their interest rate plans.
A second weekend in a row of emergency bank rescues - this
time the orchestrated buyout of Credit Suisse by its larger
Swiss rival rival UBS - has left many unanswered questions about
the viability of smaller U.S. banks and how
systemically-important global banks are wound down.
With lingering doubts about how shareholders, creditors and
depositors take the hit when a bank fails, months of court
battles and the drafting new regulations lie ahead.
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