(Bloomberg) – A frenetic weekend in financials was greeted by relatively small but mostly positive moves in markets on Monday, with U.S. stock futures rising and a dollar gauge falling slightly.
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Early readings on UBS Group AG’s deal to buy Credit Suisse Group AG and the central bank’s moves to boost dollar liquidity suggested sentiment was improving. Two weeks marked by multiple U.S. bank failures followed by additional problems at Credit Suisse have reinforced growing belief that global economies will struggle.
S&P 500 futures rose about 0.4% after the index fell more than 1% on Friday, led by the financial sector. Contracts for the Nasdaq 100 also gained about 0.4% after the gauge posted its best week since November with a 5.8% jump, despite falling on Friday.
Tech stocks, which often benefit from lower interest rates, have been buoyed by fears that turmoil in the banking sector could tip the global economy into recession, in turn forcing central banks to reverse the course of the monetary tightening.
A dollar strength index fell 0.1%, the Swiss franc fluctuated, the yen weakened and the risk-sensitive Australian dollar made small gains. Still, equity benchmarks for Australia and New Zealand opened lower.
Investors continue to debate whether the Federal Reserve will make another quarter-point hike or pause at its March 21-22 meeting. Traders no longer see much chance of a bigger half-point hike that Chairman Jerome Powell put on the table just before financial stability concerns emerged.
“It’s not at all clear that avoiding a rate hike would even help solve the financial problems of the banking system,” said Gerard MacDonell of 22V Research. “For the Fed, waiting until Wednesday could send a panic signal. It could also lead to further intensification of inflationary pressures and greater volatility in the bond futures market.
Yields on Australian and New Zealand bonds fell less than 10 points after yields fell across the curve in the US debt market on Friday. The policy-sensitive two-year Treasury yield, which fell more than 30 basis points on Friday, hovered more than 20 basis points for the seventh straight session as traders recalibrated bets on higher rate. A weaker-than-expected reading on inflation expectations on Friday added downward pressure on yields.
Policymakers are racing to restore confidence after the collapse of Silicon Valley Bank and problems at Credit Suisse added to broader concerns about financial stability.
UBS’s government-backed takeover of Credit Suisse aims to address client exits and a massive rout of the target’s stocks and bonds.
Meanwhile, the Fed and five other central banks announced coordinated action to increase liquidity in US dollar swap agreements to ease strains in the global financial system.
“At first glance, this seems like a precautionary measure, but it’s hard to know because not all markets are fully open yet,” said Subadra Rajappa, head of US rates strategy at Societe Generale SA. “The recovery in dollar swap lines was relatively subdued last week, I suspect this is in preparation for the market’s reaction to the Swiss bank merger. The recovery in equity futures is modest, it It’s hard to read too much into it.”
Elsewhere in the markets, Bitcoin traded near its highest level since June amid a broad rally in cryptocurrencies. Gold fell from a one-year high as the run for safe-haven assets eased.
Oil stabilized as measures taken by policymakers to contain the banking crisis supported demand.
Here are the main market movements:
Shares
S&P 500 futures rose 0.4% at 8:13 a.m. Tokyo time. The S&P 500 fell 1.1% on Friday
Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 0.5% on Friday
Nikkei 225 futures fell 1.1%
Australia’s S&P/ASX 200 index fell 0.8%
Hang Seng index futures fell 1.7%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.0674
The Japanese yen fell 0.2% to 132.11 per dollar
The offshore yuan was little changed at 6.8842 to the dollar
The Australian dollar rose 0.2% to $0.6709
The Swiss franc was little changed at 0.9270
Cryptocurrencies
Bitcoin rose 1% to $28,243.09
Ether rose 0.6% to $1,809.36
Obligations
Goods
West Texas Intermediate crude rose 0.3% to $66.93 a barrel
Spot gold fell 0.5% to $1,978.85 an ounce
This story was produced with assistance from Bloomberg Automation.
–With help from Katie Greifeld and Isabelle Lee.
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