Marketmind: Bank angst echo
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[April 25, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
Bombarded by incoming corporate earnings updates and increasingly wary
of tense geopolitics, world markets appear to have turned sour again on
financial stocks as the full extent of March bank stress unfolds.
Shares in First Republic Bank, one of the most hit regional banks during
last month's blowup, sank 22% ahead of Tuesday's open after it said
deposits plunged by more than $100 billion in the first quarter - adding
it aims to restructure its balance sheet and lay off up to a quarter of
staff.
Although First Republic said deposit flight had stabilised since
quarter-end, the echo of the March crisis reverberated around other
regional banks and global banking stocks at large.
UBS shares were down almost 3% after it said it had set aside more money
to draw a line under its involvement in toxic mortgages, halving its
first-quarter profit as it prepares to swallow fallen rival Credit
Suisse.
European bank stock indices fell 2%. Spain's Santander fell almost 4%
despite reporting higher profits and Germany's Deutsche Bank fell 3%
ahead of its results later in the weekly.
Ironically, the latest banking wobble comes as the world's top central
banks said they will reduce the frequency of their dollar swap
operations with the U.S. Federal Reserve from May 1 as last month's
volatility in financial markets had receded.
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But the new bank rumble, heightened political tensions between Western
powers and the China/Russia alliance and nerves about the standoff over
the U.S. government debt ceiling have all fed simmering investor anxiety
this week.
Although the euro has been lifted against the dollar by increasingly
hawkish rhetoric by European Central Bank officials, it's the Swiss
franc which is leading European currencies higher - hovering close to
its best levels against the U.S. currency in more than two years.
With the Bank of Japan expected to double down on its easy monetary
policy stance later this week, the Swiss franc is also testing its
strongest levels against the yen in at least eight years.
Chinese stocks fell for the fifth straight session, meantime, and the
yuan fell to its lowest against the euro since September 2021.
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![](../images/042523PIX/busine38.jpg)
A trader works at the post where First
Republic Bank stock is traded on the floor of the New York Stock
Exchange (NYSE) in New York City, U.S., March 16, 2023.
REUTERS/Brendan McDermid
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With all the uptick in stress and a weak manufacturing survey from
the Dallas Federal Reserve on Monday, U.S. Treasury yields fell back
and futures markets upped the chances of Fed rate cuts later in the
year. The debt ceiling jitters smouldered in the background as
Republicans tried to push their new spending cut plan through
Congress.
One-month Treasury bill yields, which had plummeted over the past
week as investors tried to avoid 3-month bills likely to get caught
in any government funding crunch over the issue, pushed back
slightly higher on Tuesday.
And with Wall St now awaiting a torrent of profit updates later
today, including mega caps Microsoft and Alphabet after the bell,
stock futures were half a percent in the red.
Events to watch out for on Tuesday:
* U.S. April consumer confidence, April Philadelphia Fed service
sector survey, April Richmond Fed manufacturing survey, Dallas Fed
services survey, U.S. March new home sales, Feb house prices * U.S.
corp earnings: Microsoft, Alphabet, Visa, Northern Trust, Moody's,
PepsiCo, McDonald's, Kimberly-Clark, 3M, Invesco, Fiserv, Danaher,
UPS, Verizon, Texas Instruments, NextEra Energy, Raytheon, GE, GM,
Chipotle, MSCI, Biogen, Dow, Paccar, Centene, Enphase Energy,
Halliburton, Spotify, Boston Properties, Chubb, United Health,
Juniper Networks, CoStar etc
* U.S. Treasury auctions 2-year notes
* Bank of Spain governor Pablo Hernandez de Cos speaks
(By Mike Dolan, editing by Christina Fincher; mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
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