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Europe, US futures rise on Credit Suisse funding: markets wrap

Europe, US futures rise on Credit Suisse funding: markets wrap
A sign featuring Japanese yen, top left, euro, top right, British pound sterling, bottom left, and U.S. dollar is displayed at a currency exchange store in Hong Kong, China, on Thursday, March 16, 2017. Hong Kong's shopping districts are dotted with money changers advertising their remittance services and conversion rates. There are 1,891 licensed money operators in the city, Hong Kong customs data show. Photographer: Anthony Kwan/Bloomberg

European and US equity futures advanced, Asian stocks pared losses and Treasuries fell on Thursday after Credit Suisse Group AG said it would borrow money from Switzerland’s central bank and seek to repurchase debt.

Contracts for the Euro Stoxx 50 index climbed more than 2% as the news from Credit Suisse provided a measure of calm for jittery investors. It has arranged to borrow as much as 50 billion francs (R994.43-billion) from a Swiss National Bank liquidity facility and will offer to buy back up to three billion francs of dollar- and euro-denominated debt. 

The Swiss franc was stronger but off its intraday high in volatile trade after a sharp selloff on Wednesday. The euro strengthened slightly ahead of an expected rate increase from the European Central Bank later on Thursday, with more investors now positioning for a 25 basis point move after earlier expectations for double that.

Treasury yields rose about six basis points at the short end of the curve following steep falls in the previous session. Australian and New Zealand yields fell, as did those for Japan’s benchmark 10-year debt.

Asian shares recouped some losses from earlier in the session while a gauge for the region remained down by 1%. Equity benchmarks in Japan, Australia and Hong Kong also fell about 1%, with financial companies among the hardest hit in the three markets.

Contracts for the S&P 500 rose about 0.4% after the index fell 0.7% on Wednesday. Tech stocks offered a bright spot as traders began to forecast interest rates climbing less than previously anticipated. Nasdaq 100 futures advanced on Thursday after the benchmark posted its third day of gains on Wednesday as Netflix, Meta Platforms, Microsoft, and Amazon.com rallied.

Selling in bank stocks dragged the KBW Bank Index, one of the broadest measures of the US banking system, down more than 3% on Wednesday. First Republic Bank shares fell more than a fifth after being cut to junk by two credit firms, dragging its decline over the past week to more than 70%. 

Traders were almost evenly split on whether the Federal Reserve will increase interest rates when it meets next week. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.

“This episode is not the same as 2008. It is not a credit crisis, but an asset crisis,” said Nicholas Ferres, chief investment officer of Vantage Point Asset Management. “The challenge now that has been uncovered is the mark-to-market fantasy of venture capital, private equity and commercial real estate assets.”

The yen strengthened against the greenback while an index of the dollar steadied after a Wednesday rally. 

Elsewhere in markets, oil rose from the lowest close in 15 months after a three-day rout started by the US banking crisis and accelerated by options covering.

Copper and aluminium also advanced. Gold traded near a six-week high, on signs that problems in the banking sector may cause the Fed to pause rates hikes. BM/DM

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