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S&P Futures Jumps Into SVB Backstop, Odds Change: Market Ends


(Bloomberg) – U.S. stock futures rose more than 1.5% while the dollar and bond yields tumbled as investors understood the steps regulators took to revive the sector. American finance after the failure of the Silicon Valley Bank.

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Finance Minister Janet Yellen said her office would protect “all depositors” at the bank, Friday’s collapse marking the biggest since 2008. The government’s actions will also include a new lending program that Federal Reserve officials say will be large enough to protect uninsured deposits in the broader US banking system.

Yields on two-year Treasuries fell as much as 24 basis points amid bets that the Federal Reserve would scale back rate hikes. Economists at Goldman Sachs Group Inc. no longer expect the Fed to raise interest rates at its March meeting due to strains in the banking system.

A measure of dollar strength fell 0.8%, with the Australian, New Zealand and Norwegian currencies all up at least 1% against the greenback.

Japan’s 10-year benchmark yield continued to fall below the ceiling of the central bank’s target trading range. Australian and New Zealand government bond yields fell as traders globally reassessed the path of rate hikes and the economic costs of the tightening cycle. The problems at SVB Financial Group’s banking are largely the result of higher US interest rates.

Japanese stocks led losses in Asia, with finances being the biggest drag on the benchmark Topix gauge. The index headed for its biggest two-day drop in a year as the yen continued to strengthen.

Meanwhile, shares in Hong Kong and mainland China rose amid positive signs of policy continuation, with China’s central bank governor, Governor Yi Gang and finance ministers. Main and commercial are kept their positions. President Xi Jinping also pledged to pursue rational economic growth, as well as technological autonomy, in his closing remarks to the National People’s Congress.

Monday’s moves in the markets come after risk assets plummeted last week, with the US stock benchmark suffering its worst week since September. Wall Street’s so-called “fear gauge” spiked, with the Cboe Volatility Index hitting a high this year. The yield on the two-year Treasury note plummeted 28 basis points to 4.59%.

“Currency cycles often end abruptly when ‘something breaks’ and a financial crisis begins,” said Ed Yardeni, founder of Yardeni Research. “If Silicon Valley Banks are anything to go by, that could mean tightening ends sooner and bond yields have peaked. We can’t say for sure which is the case, but it’s safe to say that the failure will leave the tech sector mired in a longer-lasting recession.”

Worries are also heightened ahead of this week’s consumer price index report, especially after Fed Chairman Jerome Powell recently emphasized that a move to a faster pace of tightening would be based on “total data.”

For now, however, assurances from US regulators for SVB are having the desired effect.

“This will bring confidence to the market. But from the Fed’s perspective, there are additional dangers that need to be considered, which will take some time,” Pepper International’s Carol Pepper said on Bloomberg TV. “So I hope that this gives them a good reason to pause because frankly creating financial stability is the number one job at the Fed.”

Elsewhere in the market, oil fluctuated while gold rose with appeal as a safe-haven. Bitcoin escalates, reflecting investor relief.

This week’s main events:

  • Retail Sales, Industrial Production, Medium-Term Loans, Unemployment Rate Surveyed China, Wednesday

  • Eurozone Industrial Production, Wednesday

  • US business inventories, retail sales, PPI, manufacturing empire, Wednesday

  • Eurozone Rate Decision, Thursday

  • US housing starts, initial jobless claims, Thursday

  • Janet Yellen Appears Before the Senate Finance Committee, Thursday

  • US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday

Some key moves in the market:

share

  • S&P 500 futures were up 1.6% at 11:54 a.m. Tokyo time. S&P 500 drops 1.5% on Friday

  • Nasdaq 100 futures rose 1.7%. Nasdaq 100 drops 1.4%

  • Japan’s Topix Index drops 2%

  • Hong Kong’s Hang Seng Index rose 1.7%

  • China’s Shanghai Composite Index rose 0.7%

  • Australia’s S&P/ASX 200 Index drops 0.2%

currency

  • Bloomberg Dollar Spot Index drops 0.9%

  • The euro rose 0.7% to $1.0720

  • Japanese yen rose 0.9% to 133.84 to the dollar

  • Offshore yuan rose 1.1% to 6.8663 per dollar

  • Australian Dollar up 1.3% to $0.6666

electronic money

  • Bitcoin up 3.8% to $22,317.81

  • Ether up 2.8% to $1,601.05

bonds

  • Yields on 10-year Treasuries fell 4 basis points to 3.66%

  • Japan’s 10-year yield fell 6.5 basis points to 0.33%

  • Australia’s 10-year yield fell 9 basis points to 3.49%

Goods

  • West Texas Intermediate crude rose 0.4% to $76.96 a barrel

  • Spot gold rose 1% to $1,887.61 an ounce

This story was made possible with support from Bloomberg Automation.

–With support from Vildana Hajric and Isabelle Lee.

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