US Bank Troubles Hammer Stocks, Boost Treasuries: Markets Wrap

(Bloomberg) — Global stocks slumped on Friday and Treasuries rallied on concern that pockets of trouble in the US banking sector could portend broader dangers as higher interest rates start to bite.

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Europe’s Stoxx 600 equity gauge opened more than 1% lower, following on from a 2% fall in Asian stocks and a late-Thursday slump on Wall Street. An index of European bank shares shed almost 5%. Futures on the US S&P 500 lost about half a percent after the underlying benchmark fell the previous day to a seven-week low, amid a plunge in a bank shares index. As investors dashed for safety, Treasury yields fell across the curve, with the two-year segment slipping to 4.75%, heading for its biggest two-day slide since last June.

The rout came after Silvergate Capital Corp. collapsed amid growing scrutiny in Washington and SVB Financial Group plummeted by a record amount following a stock sale to shore up losses. Their woes highlight the impact on the financial sector from relentless Federal Reserve policy tightening, which has eroded the value of loans and other investments made when interest rates were low, and raises the prospect of more bank losses to come.

“When market nerves were already on edge amid rising Fed rate expectations, news of California-based Silicon Valley Bank facing a liquidity crisis tipped investors over the edge,” RBC Capital analyst Alvin Tan told clients in a note.

Money markets have already scaled back bets the Fed would opt for a half-point hike at its March 21-22 meeting to about an even chance, having earlier priced a 75% likelihood. Data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly swelled to the highest this year.

That set the stage for Friday’s monthly jobs report. Economists project a 225,000 increase in February payrolls, about half January’s blockbuster pace, and a softer number could further tilt expectations back to a quarter-point hike.

However, the Fed will have to position to “potentially raise by a half a percentage point very quickly” if the payrolls data come in hotter than expected, Danielle DiMartino Booth, chief executive officer and chief strategist at Quill Intelligence, said on Bloomberg Television.

On currency markets, the dollar stayed flat against a basket of currencies, while the yen retreated after the Bank of Japan kept monetary settings unchanged at Governor Haruhiko Kuroda’s final policy meeting. The pound firmed after data showing the UK economy had bounced back in January.

The switch-off in risk sentiment and the wind-down of crypto-friendly Silvergate put bitcoin on track for its worst week since November. A Bloomberg commodity index has lost more than 4% this week, while oil is headed for its biggest weekly loss since early February.

Key events this week:

  • US nonfarm payrolls, unemployment rate, monthly budget statement, Friday

Some of the main moves in markets:


  • S&P 500 futures fell 0.6% as of 3:12 a.m. New York time

  • Nasdaq 100 futures fell 0.3%

  • Futures on the Dow Jones Industrial Average fell 0.6%

  • The Stoxx Europe 600 fell 1.5%

  • The MSCI World index fell 0.6%

  • S&P 500 futures fell 0.6%

  • Nasdaq 100 futures fell 0.3%

  • The MSCI Asia Pacific Index fell 1.8%

  • The MSCI Emerging Markets Index fell 1.4%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0584

  • The British pound rose 0.2% to $1.1944

  • The Japanese yen was little changed at 136.19 per dollar

  • The offshore yuan was little changed at 6.9731 per dollar


  • Bitcoin fell 1.5% to $19,926.2

  • Ether fell 1.5% to $1,410.48


  • The yield on 10-year Treasuries declined 10 basis points to 3.80%

  • Germany’s 10-year yield declined 16 basis points to 2.48%

  • Britain’s 10-year yield declined 16 basis points to 3.64%


  • West Texas Intermediate crude fell 0.9% to $75.05 a barrel

  • Gold futures rose 0.3% to $1,840.80 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rob Verdonck and Akshay Chinchalkar.

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