by Claude Chendjou
PARIS (Reuters) – The main European stock markets are expected on a stable note on Monday at the opening after Friday’s fall linked to the setbacks of SVB Financial Group as the authorities try to reassure on the impact of the collapse of the bank American.
Index futures suggest a 0.19% decline for the CAC 40 in Paris, a 0.01% advance for the Dax in Frankfurt, a 0.02% decline for the FTSE 100 in London and a rise 0.05% for the EuroStoxx 50.
Operating as Silicon Valley Bank (SVB), SVB Financial Group collapsed on the stock market last week after a surprise capital increase intended to make up for a loss of 1.8 billion dollars, following the sale of a bond portfolio.
On Friday, Californian authorities announced the closure of the American bank and the possibility for customers to withdraw their deposits as of Monday. The United Kingdom, for its part, said on Sunday that it wanted to “avoid or minimize the damage” linked to the fall of SVB, while the Secretary of State for the Treasury, Janet Yellen, said she was working closely with the authorities of banking regulation on the file while excluding a bailout of the bank.
The Federal Reserve (Fed), for its part, is committed to making funds available, via a new bank financing program, for institutions that need it.
The banking sector should however remain under tension since the authorities of the State of New York announced on Sunday, to everyone’s surprise, the closure of another bank, Signature Bank, the third largest failure in American banking history, two days after that of SVB.
On the macroeconomic level, the agenda for the day is practically empty but investors are awaiting new data on consumer prices in the United States on Tuesday, about a week before the monetary policy meeting of the American Federal Reserve (Fed).
After the contrasting data of the last monthly report on employment in the United States which showed Friday non-farm job creations above expectations, at 311,000 in February, but wage growth below consensus, at 4.6 % over one year, a surprise on inflation could rekindle fears about the trajectory of interest rates, even if for the time being an increase in the cost of credit is no longer certain in view of the setbacks of SVB.
In Europe, the main meeting of the week is the monetary policy meeting of the European Central Bank (ECB) on Thursday.
AT WALL STREET
The New York Stock Exchange ended lower on Friday as fears over the health of the US banking sector overshadowed the US jobs report.
The Dow Jones index fell 1.07%, or 345.22 points, to 31,909.64 points.
The broader S&P-500 lost 56.73 points, or 1.45%, to 3,861.59 points.
The Nasdaq Composite fell for its part by 199.47 points (-1.76%) to 11,138.89 points.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index ended down 1.11% to 27,832.96 points and the broader Topix fell 1.51% to 2,000.99 points.
In China, the Shanghai SSE Composite gained 1.2% and the CSI 300 gained 1.05%.
RATE
The yield on two-year US Treasury bills fell more than 15 basis points to 4.42%, far from its peak of 5.08% hit last week.
“In light of the strains in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” Goldman Sachs analysts wrote.
“We left unchanged our forecast that the FOMC will make 25 basis point hikes in May, June and July and we now expect a terminal rate of 5.25 to 5.5%, although we see a considerable uncertainty about the trajectory,” these analysts add.
The ten-year Treasuries yield was stable at 3.68%.
In Europe, the yield on the two-year German Bund stands at 3.01, down six basis points, and the ten-year one at 2.46% (-3 points).
CHANGES
The dollar fell 0.28% on Monday against a basket of benchmark currencies, hurt by the prospect that the Fed will be less aggressive in raising interest rates after the SVB rout.
The Japanese currency is displayed at 134.41 yen per dollar (+0.42%), while the euro rises to 1.0713 dollar (+0.66%).
GOLD
Gold prices jumped more than 1% on Monday as fears of the impact of SVB, the biggest US bank failure since the 2008 financial crisis, pushed investors into the safe-haven asset.
Around 07:30 GMT, gold rose only 0.27% to 1,873.14 dollars an ounce, after hitting a peak since February 3 at 1,893.96 dollars.
OIL
The oil market is supported by the hope of a recovery in demand in China and the depreciation of the dollar: Brent gains 0.33% to 83.05 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.31% to $76.91.
(Written by Claude Chendjou, edited by Blandine Hénault)
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