New York, March 14 (BNA): Stocks of global banks and short-term US Treasury yields declined today, Monday, as concerns persisted about the repercussions of the collapse of Silicon Valley Bank, despite the measures taken by regulators.
The US dollar also fell. Gold and silver prices rose amid safe-haven buying, Reuters reported.
Bond markets have seen rate hike bets repriced, with growing expectations that rate hikes will be halted or reduced.
The Dow Jones Industrial Average fell 90.50 points, or 0.28%, to 31819.14, lost 5.83 points, or 0.15%, to 3855.76 points, and rose 49.96 points, or 0.45%, to 11188.84 points.
The MSCI World Equity Index, which tracks stocks in 49 countries, lost 0.39%.
European stocks posted their biggest one-day drop this year, with the European STOXX 600 closing down 2.3%.
The European Banks Index fell around 6% after losing 3.8% on Friday. HSBC’s London listing fell after it said it would acquire the UK branch of the stricken Silicon Valley bank for the symbolic sum of one pound ($1.21).
US regional bank stocks fell, led by losses at First Republic Bank as news of new funding failed to quell bank contagion fears.
Swiss financial watchdog FINMA said on Monday it was seeking to identify any potential contagion risks for banks and insurance companies in the country.
Over the weekend, the Federal Reserve and the US Treasury announced measures to stabilize the banking system and said that SVB depositors will be able to access their deposits on Monday.
The Fed also said it would provide additional funding through a new “Term Bank Financing Program,” which would provide loans of up to one year to depository institutions, backed by Treasury bills and other assets held by those institutions.
“We are witnessing a classic flight to safety,” said Tom Caddick, managing director at Nedgroup Investments. “High interest rates and a slowing economy have always been bad.”
US authorities also seized New York-based Signature Bank, the second bank to fail in a matter of days.
Analysts said it was more important for the Fed to accept collateral at par rather than signaling to the market, allowing banks to borrow money without having to sell assets at a loss.
Traders are no longer expecting a 50 basis point rate hike by the Federal Reserve next week and current expectations are for a 25 basis point move, some even not expecting any increase at all, making gold, which is non-interest bearing, more attractive.
“A lot of these Fed members are dovish, and there is still quite a bit of inflation pressure that I would anticipate in the upcoming data points that will complicate the picture for the Fed,” said Edward Moya, senior market analyst at the data and analytics firm. OANDA.
Moya pointed to the consumer price index data for February, which is due on Tuesday, and the output price index data, which is due on Wednesday.
Goldman Sachs said in a note that analysts no longer expect the Fed to raise interest rates at its next meeting on March 22. Others remained wary.
James Rossiter, head of global macro strategy at TD Securities in London, said volatility in the markets should become more apparent once central banks, including the European Central Bank, the Federal Reserve and the Bank of England, outline their next steps.
“Other unaffected banks may take a reverse risk approach to lending which could lead to tightening financial conditions and doing some Fed work on their behalf,” he added, adding that central banks before interest rate decisions enter a quiet period, unable to guide the markets. on their next step.
Short-term US Treasury yields have fallen, driving up their prices. The two-year bond yield fell below 4% for the first time since last October and was on track for its biggest one-day drop since October 1987 in the wake of the Black Monday stock market crash.
The European Central Bank, which meets on Thursday, is still widely expected to raise interest rates by 50 basis points and signal more tightening ahead, although for now it will have to take financial stability into account.
The dollar index, a measure of the greenback against six other currencies, was down 0.6%. The euro rose 0.8%.
The Mexican Peso lost as much as 3.7% amid a sell-off in Latin American currencies.
Gold rose, with spot prices still rising over 2.4% to their highest level since early February. US futures rose 2.6%, to settle at $1,916.50.
Elsewhere in commodities, Brent crude futures closed down $2.01, or 2.4%, at $80.77. The global benchmark earlier fell to a session low of $78.34, its lowest since early January.
US West Texas Intermediate crude futures fell $1.88, or 2.5 percent, to $74.80 a barrel, after earlier hitting their lowest since December.
($1 = 0.8296 pounds)
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