Bank angst echo
A look at the day ahead in U.S. and global markets from Mike Dolan
Bombarded by incoming corporate earnings updates and increasingly wary of tense geopolitics, world markets appear to have turned sour again on financial stocks as the full extent of March bank stress unfolds.
Shares in First Republic Bank FRC.N, one of the most hit regional banks during last month's blowup, sank 22% ahead of Tuesday's open after it said deposits plunged by more than $100 billion in the first quarter - adding it aims to restructure its balance sheet and lay off up to a quarter of staff.
Although First Republic said deposit flight had stabilised since quarter-end, the echo of the March crisis reverberated around other regional banks and global banking stocks at large.
UBS UBSG.S shares were down almost 3% after it said it had set aside more money to draw a line under its involvement in toxic mortgages, halving its first-quarter profit as it prepares to swallow fallen rival Credit Suisse CSGN.S.
European bank stock indices .SX7P, .SX7E fell 2%. Spain's Santander SAN.MC fell almost 4% despite reporting higher profits and Germany's Deutsche Bank DBKGn.DE fell 3% ahead of its results later in the weekly.
Ironically, the latest banking wobble comes as the world's top central banks said they will reduce the frequency of their dollar swap operations with the U.S. Federal Reserve from May 1 as last month's volatility in financial markets had receded.
But the new bank rumble, heightened political tensions between Western powers and the China/Russia alliance and nerves about the standoff over the U.S. government debt ceiling have all fed simmering investor anxiety this week.
Although the euro has been lifted against the dollar by increasingly hawkish rhetoric by European Central Bank officials, it's the Swiss franc which is leading European currencies higher - hovering close to its best levels against the U.S. currency in more than two years.
With the Bank of Japan expected to double down on its easy monetary policy stance later this week, the Swiss franc is also testing its strongest levels against the yen in at least eight years.
Chinese stocks fell for the fifth straight session, meantime, and the yuan fell to its lowest against the euro since September 2021.
With all the uptick in stress and a weak manufacturing survey from the Dallas Federal Reserve on Monday, U.S. Treasury yields fell back and futures markets upped the chances of Fed rate cuts later in the year. The debt ceiling jitters smouldered in the background as Republicans tried to push their new spending cut plan through Congress.
One-month Treasury bill yields, which had plummeted over the past week as investors tried to avoid 3-month bills likely to get caught in any government funding crunch over the issue, pushed back slightly higher on Tuesday.
And with Wall St now awaiting a torrent of profit updates later today, including mega caps Microsoft and Alphabet after the bell, stock futures were half a percent in the red.
Events to watch out for on Tuesday:
* U.S. April consumer confidence, April Philadelphia Fed service sector survey, April Richmond Fed manufacturing survey, Dallas Fed services survey, U.S. March new home sales, Feb house prices * U.S. corp earnings: Microsoft, Alphabet, Visa, Northern Trust, Moody's, PepsiCo, McDonald's, Kimberly-Clark, 3M, Invesco, Fiserv, Danaher, UPS, Verizon, Texas Instruments, NextEra Energy, Raytheon, GE, GM, Chipotle, MSCI, Biogen, Dow, Paccar, Centene, Enphase Energy, Halliburton, Spotify, Boston Properties, Chubb, United Health, Juniper Networks, CoStar etc
* U.S. Treasury auctions 2-year notes
* Bank of Spain governor Pablo Hernandez de Cos speaks
First Republic Bank earningshttps://tmsnrt.rs/3HbfWuD
Credit Suisse's wealth assets crumblehttps://tmsnrt.rs/3HbujiO
By Mike Dolan, editing by Christina Fincher; mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
