(Bloomberg) — US equity-index futures posted modest gains at the end of a tumultuous week for global markets, with concern lingering that the financial turmoil which has roiled bonds and stocks is not yet over.
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Contracts on the S&P 500 fluctuated after the index rallied 1.8% yesterday as larger banks threw a lifeline to First Republic Bank, the latest US lender to signal stress. That didn’t stop shares in First Republic from sliding during after-hours trading, however. Futures on the Nasdaq 100 were steady as the rates-sensitive gauge heads for its best week since November amid expectations the Federal Reserve will temper its tightening path. The 10-year Treasury yield dipped and a gauge of the dollar declined.
Banks including JPMorgan Chase & Co. and Citigroup Inc. banded together in a show of support for First Republic on Thursday. While the rescue attempt helped boost sentiment, billionaire investor Bill Ackman was among those questioning whether it would be enough to halt the crisis. Meanwhile, US banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure.
“We do not expect a full-blown financial crisis, but one must not dismiss the underlying dynamics,” said Karsten Junius, the chief economist at Bank J Safra Sarasin AG. “Financial conditions will most likely tighten further and increase recession risks. We therefore advocate a defensive positioning with regard to risk assets and a tactically cautious stance on the banking sector, even though the constructive case for banks remains intact over the medium to longer term.”
The Stoxx Europe 600 index advanced about 1% at the open, though the gauge is still heading for a second weekly decline. An index of European banking stocks has tumbled 8% this week even after the Swiss central bank’s lifeline to Credit Suisse Group AG. Shares in the troubled Swiss lender edged higher on Friday as the idea of a forced combination with a larger rival, UBS Group AG, was shot down. Bonds across Europe gained, with Germany’s 10-year yield down four basis points.
Markets were also digesting a 50 basis points rate hike by the European Central Bank and comments from the ECB president that inflation is projected to remain too high for too long. The ECB rate hike added to bets the Federal Reserve will also raise next week.
Indexes rose in Hong Kong, Japan and Australia amid a rebound in banking shares. Even so, an Asia equity gauge was set for a second weekly loss after the recent turbulence in the banking sector.
Friday’s quarterly triple witching, where contracts for index futures, equity index options and stock options all expire, could amp up swings in trading.
BlackRock Investment Institute does not expect cracks in the financial sector to deter central banks from raising rates further to contain inflation. It expects both the ECB and the Fed to “go as far as possible to distinguish their inflation fighting campaigns from measures to deal with bank troubles and safeguard the financial system,” a team of BlackRock analysts wrote in a note.
In China, traders were able to access widely used bond price feeds again after an abrupt suspension of the data earlier in the week roiled the $21 trillion market.
Bitcoin rose to near the highest level since June amid a broad rally in cryptocurrencies. Other tokens such as Ether, Solana and Polkadot surged as well.
Elsewhere, oil advanced but was still headed for the worst week so far this year. Gold rose.
These are the main market moves:
The Stoxx Europe 600 rose 1% as of 8:11 a.m. London time
S&P 500 futures rose 0.3%
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 1.4%
The MSCI Emerging Markets Index rose 1.4%
The Bloomberg Dollar Spot Index fell 0.4%
The euro rose 0.5% to $1.0666
The Japanese yen rose 0.4% to 133.23 per dollar
The offshore yuan rose 0.4% to 6.8673 per dollar
The British pound rose 0.5% to $1.2167
Bitcoin rose 5.8% to $26,198.71
Ether rose 3.9% to $1,723.81
The yield on 10-year Treasuries declined two basis points to 3.56%
Germany’s 10-year yield declined three basis points to 2.26%
Britain’s 10-year yield declined one basis point to 3.41%
Brent crude rose 1% to $75.47 a barrel
Spot gold rose 0.5% to $1,928.47 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna and Angel Adegbesan.
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