European stocks tumbled at the open but US futures rose on Monday as regulators in the US and Britain rushed to prevent the collapse of Silicon Valley Bank from spreading into the wider economy.
The region wide Stoxx 600 was down 1.8 per cent while Germany’s Dax lost 1.9 per cent. France’s Cac 40 lost 1.8 per cent. Futures markets indicated that the benchmark S&P 500 index would rise 0.4 per cent at the open and the Nasdaq 100 0.6 per cent higher.
Investors were digesting moves from authorities in the US and Britain, who worked over the weekend to insulate customers from the failure of California-based SVB and its UK arm on Friday. Authorities took over SVB, the bank for many US technology start-ups, after customers rushed to withdraw $42bn — a quarter of total deposits — in a single day.
London’s FTSE 100 fell 1.2 per cent after the UK government confirmed that the UK business would be sold to HSBC.
The US government set out emergency measures to protect the banking system after the collapse of SVB, with the Federal Deposit Insurance Corporation, Federal Reserve, and Treasury department saying depositors “will have access to all of their money starting Monday”. Regulators also shut down Signature Bank.
Investors also began to question whether the Federal Reserve would waver on interest rate rises following the failure of the SVB, Silvergate and Signature banks in the past week. Investors had been pricing in a 0.5 percentage point rise after comments last week by Fed chair Jay Powell.
On Tuesday, US consumer price index numbers will be released, the latest in a series of anticipated data releases which will provide investors with clues as to the pace of the economy and likely interest rate rises.
The dollar dropped 0.6 per cent against a basket of other currencies during morning trading. The pound rose 0.7 per cent against the dollar.
Equities in Asia were mixed. Japan’s Topix was down 1.5 per cent at midday after falling 1.5 per cent in the first 10 minutes of trading.
Hong Kong’s Hang Seng index added 1.8 per cent and mainland China’s CSI 300 rose 1.1 per cent on Monday.
At an annual session of parliament on Sunday, Beijing announced it was keeping the head of the central bank and finance minister in their posts. China’s credit growth in February was also higher than expected, bolstering economic recovery hopes.
Shanghai Pudong Development Bank, which owns a stake in a joint venture with Silicon Valley Bank’s China unit, lost 1.3 per cent.
The yield on the 10-year US Treasury fell 0.03 percentage points to 3.67 per cent, while the yield on the two-year note fell 0.14 percentage points to 4.45 per cent. Yields move inversely to price. 10-year German Bund yields fell 0.06 percentage points to 2.44 per cent.
Brent crude rose 0.3 per cent to $83.08 per barrel, and WTI, the US equivalent, rose 0.4 per cent to $77.04 per barrel.