NEW YORK, March 28 — Wall Street equities gained and US Treasury yields rose yesterday as investor concerns about the financial system were calmed after First Citizens BancShares said it would take on the deposits and loans of failed Silicon Valley Bank.
The deal offered a respite after weeks of turmoil prompted by the collapse of tech-focused Silicon Valley Bank and punctuated by more bank failures and rescues.
And on Saturday Bloomberg News reported that US authorities are considering the expansion of an emergency lending facility that would offer banks more support, easing concerns about contagion.
US Treasury yields rose on optimism that stress in the banking sector could be contained, and as the Treasury Department saw soft demand for a sale of two-year notes.
The S&P 500 bank index, after closing down more than 22 per cent for the month-to-date on Friday, finished up 3 per cent on the day. In Europe, Deutsche Bank shares rose 6 per cent after falling sharply on Friday with fears spreading to the United States after the cost of insuring its debt against default jumped.
“The main driver to (yesterday’s) sentiment has been the banking news over the weekend,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Citing the First Citizens deal and the potential for expansion of emergency US lending, James said there was a “sigh of relief” yesterday for the banking sector “which has had a giant anchor around its neck for the last three weeks.”
While the weekend’s news helped yesterday’s mood, it did not completely dispel concerns about the bank sector and the impact of higher interest rates on the global economy, which has also been struggling with stubbornly high inflation.
For the underperformance of rate-sensitive sectors such as technology yesterday, James pointed to an increased probability that the US Federal Reserve would raise interest rates in May compared with Friday’s expectations. The central bank has been raising rates for a year as it battles inflation.
“The greater the likelihood of no additional bank failures the easier potentially it would be for the Fed to continue rate hikes,” James said.
The Dow Jones Industrial Average rose 194.55 points, or 0.6 per cent, to 32,432.08, the S&P 500 gained 6.54 points, or 0.16 per cent, to 3,977.53 and the Nasdaq Composite dropped 55.12 points, or 0.47 per cent, to 11,768.84.
The pan-European STOXX 600 index earlier closed up 1.05 per cent while the MSCI’s gauge of stocks across the globe gained 0.23 per cent.
Emerging market stocks lost 0.84 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.88 per cent lower, while Japan’s Nikkei rose 0.33 per cent.
US dollar flat
The dollar rose to a five-day high against the Japanese yen on Monday as authorities’ efforts to rein in worries over the global banking system helped soothe investor nerves.
The greenback traded in a narrow range against most major currencies as investors appeared hesitant to place big wagers as they sought clarity on the fallout from the recent collapse of two US lenders and the Credit Suisse rescue last week by rival UBS.
US depositors have been fleeing smaller banks for larger institutions or to money market funds. Flows to such funds have risen by more than US$300 billion (RM1.32 trillion) in the past month to a record above US$5.1 trillion, according to Bank of America, citing figures from EPFR data provider.
The Japanese yen weakened 0.64 per cent versus the greenback at 131.56 per dollar but the dollar index =USD, which measures the greenback against a basket of major currencies, fell 0.155 per cent.
The euro was up 0.36 per cent to US$1.0798 while Sterling was last trading at US$1.2286, up 0.47 per cent on the day.
The Mexican peso gained 0.54 per cent versus the US dollar at 18.34 and the Canadian dollar rose 0.66 per cent versus the greenback.
Brad Bechtel, global head of FX at Jefferies, described a “state of anxious calm” since there were no new emergencies over the weekend.
Oil prices rallied after Iraq was forced to halt some crude exports from its semi-autonomous Kurdistan region, with an additional boost from steps to stem a potential banking crisis that could potentially have hit oil demand.
US crude prices settled up 5.13 per cent to US$72.81 per barrel and Brent finished at US$78.12, up 4.17 per cent on the day.
Gold prices slipped as investors scaled back on safe-haven trades as they dipped into riskier bets such as equities. Spot gold dropped 1.0 per cent to US$1,957.22 an ounce. US gold futures fell 1.28 per cent to US$1,956.80 an ounce.
In cryptocurrencies, Bitcoin fell 3.59 per cent to US$26,998.00. — Reuters