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Stocks, futures steady as Credit Suisse woes ease


The turmoil on global financial markets eased on Thursday after regulators threw a lifeline to Credit Suisse Group AG, though signs of unrest persisted as volatility gauges remained elevated and overnight gains in US futures evaporated ahead of the European Central Bank’s rate decision.
European stocks edged higher and Credit Suisse rallied the most in history at the open, powering a gauge of bank stocks to a gain of more than 1% after the embattled Swiss lender arranged to borrow as much as 50 billion francs ($54 billion) from a Swiss National Bank liquidity facility. US stock futures were little changed. Regional banks in the S&P 500 index clung to gains, though remain sharply lower for the week. The Cboe Volatility Index edged up to 27, well above its long-term average of 20.
Treasuries were lower in early trading, sending the two-year yield back to 4% after historically steep declines in recent days. Bond across Europe declined, with German 10-year yield up 15 basis points. An index of the dollar slipped. The Swiss franc strengthened after a sharp selloff. The euro recovered from a two-month low ahead of an expected interest rate increase from the ECB, with more investors now positioning for a 25 basis point move after earlier expectations for double that.
“ECB policy makers will be grappling with the risk that sticking to the original plan to hike 50 basis points could further undermine confidence,” said Sarah Hewin, head of Europe and Americas research at Standard Chartered Plc. “Not tightening policy could be read by the market as an admission of underlying vulnerabilities.”
The banking sector turmoil — which kicked off last week after the failure of Silicon Valley Bank and Signature Bank — has all but erased the S&P 500’s gains so far this year. All eyes are now on the Federal Reserve’s policy meeting next week, with traders almost evenly split on whether the central bank will increase interest rates. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.
“Uncertainty is very high at the moment and there’s a lot of selling because of the shock from higher volatility and other factors,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The change in focus from inflation to growth concerns and financial stability has reversed the stock-bond correlation again. A stronger relief rally is not likely to happen before the Fed meeting.”
Elsewhere in markets, oil hovered near the lowest close in 15 months after a three-day rout started by the US banking crisis and accelerated by options covering. Gold held near a six-week high. S&P 500 futures were little changed as of 6:20 am New York time and the Nasdaq 100 futures rose 0.3%.

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