Attention has now shifted to what extent outsize bank stock moves are being driven by destabilising short selling rather than deposit flight or asset quality and how regulators can address that as well as deposit insurance funding more broadly in drawing a line under the disturbance. It's much harder to draw a line under the U.S. debt ceiling standoff, now that June 1 is identified as the day the government runs out of cash. As an indication of resulting debt default fears at the front end of the Treasury bill market, poor demand for the U.S. Treasury's auction of $50 billion in four-week bills that cover the assumed 'X date' saw 1-month yields hit 5.73% on Friday - more than half a point above the Fed's new policy rate ceiling of 5.25%. Six-month bill yields were calmer at 5.18% - but that's still more than 80 basis points above the 4.33% that futures markets see Fed rates falling to by November.
Two-year U.S. Treasury yields recovered some ground as the banking stocks have calmed, but remain as low as 3.8% and the dollar is marginally weaker - partly eyeing the European Central Bank's commitment to keep hiking interest rates beyond this week's latest rise. Sterling outperformed and hit 11-month highs as British Prime Minister Rishi Sunak's Conservative Party faced a bleak set of local election results that increased the chances of a change of government at next year's general election. But with markets already assuming Wednesday's quarter-point Fed rate rise was the last in the brutal 13-month and 500bp cycle, a key test of that will be the April U.S. payrolls report released later on Friday.
Employers likely hired the fewest workers in nearly 2-1/2
years last month, according to consensus forecasts for a 180,000
rise in jobs, as the cumulative and delayed effects of higher
interest rates start to impact.
Elsewhere in the U.S. earnings season, it was more of a
mixed bag.
Shares in cryptocurrency exchange Coinbase Global jumped 8% before the open after the firm posted a
smaller-than-feared loss in the first quarter, benefiting from
cost cuts and diversification of revenue sources.
On the other hand, Lyft's stock plunged 14% after
the ride-hailing company forecast a dull second quarter as price
cuts in its race with bigger rival Uber to add more riders take
a toll on margins.
With almost 80% of the S&P500 firms now already reported,
estimates of the overall annual decline in profits for the
quarter have fallen to less than 1% - much shallower than the 5%
contraction seen a month ago and casting doubt on assumptions an
earnings recession was already under way.
Events to watch for on Friday:
* U.S. April employment report, March consumer credit. Canada
April employment report
* U.S. Federal Reserve Board governor Lisa Cook and St Louis Fed
President James Bullard speak
* U.S. corp earnings: Cigna, Dominion Energy, Warner Bros
Discovery, AMC Entertainment, Cboe Global Markets, Johnson
Controls, Epam Systems, Evergy, AES
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U.S. payroll growth remains strong Apple earnings Apple's quarterly buybacks Overall U.S. bank credit ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(By Mike Dolan, editing by Nick Macfie
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
