LDN - Business

Global shares hit by jittery banks ahead of U.S. payrolls

[March 10, 2023] By Huw Jones

LONDON (Reuters) - Global stocks languished at two-month lows on Friday ahead of Wall Street's opening bell as Silicon Valley Bank shares came under fresh pressure, and investors waited to see how U.S. nonfarm payrolls could shape Federal Reserve thinking on rates.

Crude oil was heading for its biggest weekly loss in five weeks on worries about the prospect of steep interest rate rises in the United States slowing growth and hitting fuel demand.

The yen erased earlier losses on the Bank of Japan keeping stimulus settings steady, while the dollar eased against the Swiss franc ahead of the U.S. data.

The MSCI All Country stock index was down 0.5%, hitting its lowest level since mid-January.

In Europe, the STOXX index of 600 companies was down 1%, off its lows as selling pressure eased and U.S. stock index futures steadied.

SVB Financial Group, which does business as Silicon Valley Bank, had sought on Thursday to reassure tech clients as its stock collapsed by 60% while it was attempting to raise funds to plug a $1.8 billion hole caused by the sale of a loss-making bond portfolio.

Silicon Valley Bank, whose shares were down more than 40% in premarket trading on Friday, raised questions over the unrealised losses on bond portfolios among U.S. banks, and what that could mean for capital requirements, analysts said.

The concerns rippled through lenders in Europe.

The STOXX index of European bank shares sank 3.45% to its lowest level in more than a month, with Credit Suisse hitting an all-time low.

"I think it's panic and it's company specific," said Patrick Spencer, vice-chair of equities at RW Baird, adding it was a further sign of how the rise in borrowing costs and the end of cheap money was shaping markets.

"We are actually taking advantage of the panic induced selling and we are upgrading some of the regional banks," he said.

U.S. Labor Department data on nonfarm payrolls were due before the opening bell on Wall Street, and economists have forecast payrolls have likely increased by 205,000 last month, less than half of the huge 517,000 added in January.

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Monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar are seen at the Tokyo Stock Exchange in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato/File Photo

"Anything more than 300,000 would blow the doors off the market," Spencer said.

ING bank said U.S. Federal Reserve Chair Jerome Powell has explicitly referred to Friday's jobs data as a key driver, together with next week’s U.S. inflation figures, ahead of the Fed’s policy decisions on March 22.

Powell has warned rates could rise further and faster if data shows that is needed to get a grip on inflation.

U.S. stock index futures were mixed.

JAPANESE STIMULUS STEADY

The yen weakened and Japanese government bond yields plunged after the Bank of Japan opted to keep stimulus settings steady as expected at Governor Haruhiko Kuroda's last meeting in charge.

The benchmark 10-year JGB yield, which the BOJ pins within 50 basis points either side of zero, pulled back sharply from that ceiling to last sit at 0.445%. The yen was up 0.5% at 136.679 per dollar after a knee-jerk drop of as much as 0.6%.

Japan's Nikkei pared earlier losses to be down 1% after the central bank decision but selling began later in the session and the index was off 1.7%.

The U.S. dollar was slightly weaker and the yield on short-end Treasuries were slightly weaker at 4.8264%.

Markets were pricing in about a 50% chance of a 50 basis point Fed increase this month, down from more than 70% a day earlier.

Bitcoin was off 3% at $19,761 as the fallout from the demise of Silvergate weighs on the broader mood in digital assets. Crypto-focused lender Silvergate said it was closing down.

Brent crude futures eased 0.75% to $80.99 a barrel while gold was up 0.14% at $1,833 an ounce.

(Reporting by Huw Jones, Tom Westbrook, Kevin Buckland and additional reporting Scott Murdoch. Editing by Simon Cameron-Moore and Kim Coghill and Chizu Nomiyama)

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