Crypto redemption
STOXX 600 up 1.5%
Banks rally, volatility drops
Fed decision due tomorrow
Wall Street futures inch up
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CRYPTO REDEMPTION (0956 GMT)
Crypto has handsomely defied this banking crisis and for Bernstein this tells much about the asset going through what it believes is a "redemption" phase. Year-to-date gains for Bitcoin have now reached 67%, much better than other asset classes.
"Crypto's redemption arc is here! We have been highlighting the rapid crypto recovery across all user metrics, but the recent macro reset has accelerated the recovery path," say Bernstein's Gautam Chhugani and Manas Agrawal.
"The fundamental shift is that crypto is now trading as a risk-off, uncorrelated asset, and the last 2 years prior to FTX' demise, was more an aberration as a risk-on asset," they add.
Their have ten points to back up their thesis. Here you go:
Crypto is the best performing asset class in CY23-YTD
Survival instinct; Bitcoin has never had two years of consecutive negative returns
Bitcoin is insurance against economic dislocation
Crypto growth continues with on-chain wallet creation
Decentralized Finance seeing a strong recovery
Future of Finance is Bank-free
Ethereum's scalability is transforming with Layer-2 chains
Crypto has decades of growth
Capital has not left crypto
Bitcoin holders remain long-term focused
(Danilo Masoni)
*****
EUROPEAN INSURERS HAVE NEGLIGIBLE EXPOSURE TO AT1S (0915 GMT)
Banking stress has caused big damage to European insurers but analysts say their market losses may offer a good entry point, given the sector's negligible exposure to Credit Suisse's AT1 debt that got wiped off in the state-backed rescue deal.
The STOXX Europe 600 Insurance .SXIP index has lost around 10% since Mar. 9, after initial concerns on Silicon Valley Bank emerged and then later Credit Suisse.
"We believe this is overdone," says Berenberg and adds underperformance of insurers that have confirmed negligible exposure offers a very "attractive" trading opportunity.
Berenberg estimates that European insurers exposure to AT1s is "immaterial" and so does Citigroup who says around 30% of their asset portfolios is in corporate credit, however most of that is senior debt.
J.P.Morgan also sees low exposure. Average exposure to bank credit is around 6% of European insurers' investment portfolios, with "de minimus" exposure to sub-investment grade, it says.
UK life insurers have almost no exposure to AT1s, Berenberg adds.
Among major insurers across Europe, UK life and health insurer Prudential PRU.L, Swiss insurer Zurich ZURN.S and German insurer Allianz ALVG.DE are down ~20%, ~8% and ~9% respectively, so far this month, as of last close.
(Siddarth S)
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FINANCIALS PROP UP THE STOXX (0844 GMT)
Banks are striking back. Their index .SX7P is the best sectoral performer in Europe, up 3% and set for its biggest one-day jump in five months. That's helping make financials the top positive weight to the STOXX 600 .STOXX, last up 1.2%.
The rise is broad-based. All sectors are in the black with nine out of ten stocks trading in positive territory,
Here's your opening snapshot:
(Danilo Masoni)
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FUTURES POINT TO BOUNCE IN EUROPE (0718 GMT)
European shares were expected to show strong gains at the open on Tuesday, suggesting that markets are looking to absorb the Credit Suisse CSGN.S shock just as investors turn their focus to Wednesday's Federal Reserve policy decision.
EuroSTOXX50 STXEc1 and DAX FDXc1 futures were last up over 1%, and FTSE 100 contracts advanced 0.7%. Derivatives on the S&P 500 ESv1 edged up 0.3%, while in Asia, stocks scraped off lows, though the mood was fragile.
Credit Suisse and UBS UBSG.S shares were both trading higher in Swiss pre-market trade and so were Frankfurt-listed shares in First Republic Bank FRC.N, which bounced from the previous day's lows, indicating a steadier mood following a turbulent start of the week.
The M&A scene showed meanwhile timid signs of life. Sopra Steria SOPR.PA has agreed to buy IT company Ordina ORDN.AS for 518 million euros in cash, while Thyssenkrupp TKAG.DE was seen rising after Handelsblatt reported that CVC was considering buying its steel unit. Pearson PSON.L agreed to sell its online learning unit to private equity group Regent.
Elsewhere, German utility RWE RWEG.DE pledged a higher dividend and more investments to expand its renewables business. Kingfisher KGF.L reported a 20% fall in 2022-23 profit and forecast a further fall in its new financial year.
(Danilo Masoni)
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SIGNS OF CONFIDENCE RE-EMERGE AFTER BANK STORM (0651 GMT)
Market gyrations are common but the scale of recent moves across asset classes due to a slew of bank takeovers has shocked even the most experienced traders and investors.
Safe-havens such as gold and Treasuries are in high demand along with more speculative instruments, such as tech stocks and bitcoin, as worries over the banking crisis are boosting disparate assets.
While UBS shares were hammered in early trading on Monday after its shotgun marriage with troubled Credit Suisse following an intervention by Swiss authorities, the bank's shares pared most of the losses towards the close.
The biggest pain seems to have been inflicted on holders of Credit Suisse's risky debt, leading lawyers from Switzerland, the U.S. and Britain to talk to many Additional Tier 1 (AT1) bond holders about possible legal action, a law firm said.
On Tuesday, Asian equities staged a tentative recovery as the buyout of Credit Suisse eased immediate worries of a knock-on effect to other banks, while the U.S. dollar was stuck near a five-week low.
European Central Bank President Christine Lagarde said the market turmoil might do some of the ECB's work for it in dampening demand and inflation.
Markets have been on high alert for central banks to raise interest rates sharply to cope with high inflation.
However, there could be some surprises now.
ECB policymaker Robert Holzmann watered down his recent call for three more rate increases of 50 basis points in quick succession.
Holzmann, who heads the Austrian National Bank, told German business daily Handelsblatt two weeks ago the ECB should raise rates by 50 basis points at each of its next four meetings.
The ECB made one such increase at its meeting last week.
Meanwhile, just hours after the state-backed takeover by UBS of troubled Credit Suisse was announced, memorabilia bearing the 167-year-old bank's name and logo was being put up for sale in Switzerland, marking the end of an era for Credit Suisse.
Key developments that could influence markets on Tuesday:
Meetings: Chinese President Xi Jinping and Russian President Vladimir Putin are set to engage in formal talks regarding Beijing's proposals for a war resolution
Meetings: Britain's finance minister speaks to the Economic Affairs Committee
Central bank meetings: The Federal Reserve convenes for its two-day monetary policy meeting. Policy decision is on Wednesday
(Anshuman Daga)
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Over $95 billion in market value wiped out in 2 weekshttps://tmsnrt.rs/40nbD6C
EU openhttps://tmsnrt.rs/3yYOQCo
bitcoinhttps://tmsnrt.rs/3lxpAjS
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