Bank selling leads to S&P drop while govt. bonds surge and dollar falls against yen in U.S. market

The US stock market fell back on the 17th. Global markets have been turbulent this week, with tech stocks benefiting from the turmoil. There are growing fears that the problems that rocked the banking sector could push the global economy into recession.

The Nasdaq 100 index rose 5.8% for the week, the biggest since November last year. Old tech big-cap stocks like Microsoft and Alphabet were bought. This comes on the back of speculation that the Federal Open Market Committee (FOMC) will revise its rate hike trajectory.

The S&P 500 Index rose 1.4% for the week, even as bank stocks fell 1.1% on the day. First Republic Bank fell more than 70% in the week, despite a solidarity announcement from major banks. Credit Suisse Group exacerbated turmoil in the banking sector.At least four major banks, including Deutsche Bank, have imposed restrictions on transactions with Credit Suisse, ReutersThe news sounded. The KBW Banks Index is down 15% in five trading days.

Major banks, including JP Morgan and Citigroup, pledged solidarity with First Republic yesterday.Despite a brief brightening in sentiment, Pershing Square founder BillMr. Ackman worries about the risk of the crisis being contagious.On the other hand, the US Federal Reserve Board (FRB) offers two lenders of last resort.Borrowings by banks through the lending system totaled $164.8 billion (about 22 trillion yen) in the week ending March 15. This shows that the funding situation has deteriorated due to the bankruptcy of Silicon Valley Bank (SVB).

“Where the rate hike cycle was already accompanied by a sense of restraint, the risk of further bank bailouts and tighter credit standards has heightened the prospects for economic growth considerably,” said Ed Moya, senior market analyst at Oanda. ‘, the report noted. “Next week is going to be a critical one because the market is not sure if the FOMC will continue to raise rates, or if it will hold off in view of this week’s bank turmoil,” he said.

US Treasuries

U.S. Treasuries soared. The gains continued after the news about Credit Suisse. The market is also trying to digest the 0.5 percentage point rate hike announced by the European Central Bank (ECB) the day before.

Two-year bond yields have moved more than 20 basis points (bp, 1 bp = 0.01%) for seven trading days. The rate hike outlook has been repeatedly adjusted. Ahead of the 21st-22nd FOMC meeting, market expectations fluctuate between raising interest rates by 0.25 points and suspending interest rate hikes for the first time in about a year. The overnight index swap (OIS) market has priced in a 60% chance of a 0.25 percentage point rate hike.

Wall Street is split on which direction the FOMC will go, said Anastasia Amoroso, chief investment strategist at iCapital. He said the FOMC’s message of confidence to the market if it hiked by 0.25 percentage points would be “not very effective” and “we have to put a pause on rate hikes.” “The message that we are adapting to the situation will be the greatest signal of confidence,” he said. I think that’s the best approach,” he told Bloomberg Television.

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foreign exchange

The dollar fell against almost all 10 major currencies. The U.S. bank bailout plan eased global fears and slashed escape demand. The yen rose the most against the dollar. It rose 1.6% at one point to 131.56 yen.

Market attention is shifting to next week’s FOMC meeting. After yesterday’s ECB decision, the view that the US policy rate will be raised by 0.25 points is returning.

Strategists with UniCredit wrote in a note: “Investors will be left to see if equities can regain some composure and how major central banks such as the FOMC, the Swiss central bank and the Bank of England will react to an ECB rate hike at next week’s policy meeting. They will want to clarify the direction of the position after looking at .”

crude

New York crude oil futures fell. On a weekly basis, the rate of decline was the largest since the beginning of the corona crisis. Sentiment soured on turmoil in the banking sector.

West Texas Intermediate (WTI) futures fell nearly 13% on a weekly basis, its biggest drop in nearly three years.

“Oil price movements this week are a reminder to many market participants that macroeconomic events can hit oil sharply,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. I did,” he pointed out.

WTI futures for April delivery on the New York Mercantile Exchange (NYMEX) closed at $66.74 a barrel, down $1.61 (2.4%) from the previous day. London ICE North Sea Brent May delivery fell $1.73, or 2.3%, to $72.97.

Money

New York gold prices rise. Spot prices hit an 11-month high as the dollar weakened and U.S. Treasury yields fell.

Gold also rose on a weekly basis. It attracted demand as a haven amid turmoil in the banking sector in the United States and Europe.