US futures, European stocks rise as banks rally; Treasuries drop

BLOOMBERG

US futures rose with European stocks as the prospect of further support from US authorities eased some concerns over the troubled regional banking sector.
Contracts on the S&P 500 rose about 0.3%. First Republic Bank shares jumped 34%, leading regional peers higher, after Bloomberg reported that US authorities are considering expanding an emergency lending facility that would give the lender more time to boost its balance sheet. The Treasury 10-year yield rose about nine basis points. A gauge of dollar strength was steady.
European equities climbed, with a gauge of bank stocks in the green. Deutsche Bank AG rose and Credit Suisse AG was higher after last week’s steep losses. Novartis AG surged, pushing healthcare peers higher, after promising trial results for a cancer drug.
Traders are in for another bumpy week: developments in the banking sector will be closely watched, while remarks from multiple Federal Reserve officials and data on a key US inflation measure are also due. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.
“Fed speak should once more garner attention as markets assess how officials balance the ongoing banking sector stress against still-high inflation,” said Eddie Cheung, a senior strategist at Credit Agricole CIB. “Some early indications over the weekend point to a softening in hawkish language and a lowering in the rate expectations. Meanwhile, market sentiment is likely to remain fragile.”
Authorities are said to be considering expanding an emergency lending facility for US banks in ways that would give First Republic Bank more time to shore up its balance sheet. Yet investors in the bond market already see the wider damage in the sector running its course. They piled into wagers last week that a recession is around the corner, axing bets on any further tightening and ramping up bets for rate cuts.
In the banking sector, First Citizens BancShares Inc climbed 24% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after it was seized by the regulators.
Top US regulators said after a meeting that while some banks are coming under stress, the overall financial system is still sound.
Investors will be closely watching data on the personal consumption expenditures price index, which is the Fed’s preferred measure of underlying price pressure, that will come out later this week for direction on the US central bank’s rate path.
Also in focus are renewed geopolitical tensions, with Russia to station tactical nuclear weapons in Belarus. Elsewhere, oil rose, while gold slipped. A gauge of Asian equities fell for a second day. S&P 500 futures rose 0.6% in New York and Nasdaq 100 futures rose 0.4%.
While futures on the Dow Jones Industrial Average rose 0.6%, the Stoxx Europe 600 also climbs 1.4%. The MSCI World index rose 0.1%. The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.0768. The British pound rose 0.2% to $1.2260 and the Japanese yen fell as much as 0.6% to 131.56 per dollar.