- Asian stock markets:
- Nikkei up 0.3%, S&P 500 and European futures rise
- Eyes on Deutsche Bank, credit default swaps
- Deposits flow from banks to money market funds
SYDNEY, March 27 (Reuters) – Asian stocks struggled on Monday, with U.S. and European stock futures higher on hopes that authorities are easing hedging pressure on the global banking system.
First Citizens BancShares Inc ( FCNCA.O ) is in advanced talks to buy Silicon Valley Bank ( SIVB.O ) from Federal Deposit Insurance Corp, helping nerves.
S&P 500 futures were up 0.3% and Nasdaq futures were up 0.2%. EUROSTOXX 50 futures added 0.9% and FTSE futures added 0.6%.
Japan’s Nikkei (.N225) rose 0.3%, but South Korea (.KS11) lost 0.5%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.7%, led by a 0.5% drop in Chinese blue chips (.CSI300).
Deutsche Bank ( DBKGn.DE ) shares fell 8.5% on Friday as the cost of insuring its bonds against the risk of default rose sharply, along with many banks’ debt default swaps (CDS).
“The current level of loan defaults for European banks is slightly lower than it was at the height of the European financial crisis in 2013,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“If these CDS do not normalize, the stock market is likely to continue to suffer for several days.”
In the United States, depositors are leaving smaller banks for their larger cousins or money market funds. Flows into money market funds rose by more than $300 billion in the past month to a record $5.1 trillion.
Minneapolis Fed President Neel Kashkari said Sunday that officials were watching “very, very closely” to see if the banking crisis led to a credit crunch.
In turn, he said, the central bank approached a peak in rates. 80% chance rates have already peaked, while early July sees the first rate cut.
Fed Governor Philip Jefferson will speak later on Monday, while Fed Vice Chairman for Supervision Michael Barr will testify before the Senate on Tuesday about “banking supervision.”
The yield on two-year Treasuries has fallen 102 basis points so far this month to 3.77%, while the entire 30-year yield curve is below the effective funds rate of 4.85%.
That dive dragged the dollar down at times, with the Japanese yen hitting a seven-week low of 129.65 last week against at least 130.85 yen against the safe haven.
The euro suffered its own reversal on Friday amid concerns over Deutsche, and was last at $1.0764 and last week at $1.0930.
The fall in yields, which were trading at $1,975 an ounce after rising above $2,009 last week, coincided with a run from risk to burnish gold.
Oil prices fell again, nursing losses of nearly 10% for the month, as worries about global growth undermined commodities in general.
Brent was down 14 cents at $74.85 a barrel, while U.S. crude was down 10 cents at $69.16 a barrel.
Reporting by Wayne Cole; Editing by Sam Holmes and Jacqueline Wong
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