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Today's Top Headlines/Must Reads:
- Federal Reserve Rolls Out Emergency Measures to Prevent Banking Crisis
- China's Premier Seeks to Soothe Anxieties About Economy, Business Environment
- VCs Ease Back From Emergency Loans to Startups Caught Up in SVB Meltdown
- Silicon Valley Bank's U.K. Arm to Be Bought by HSBC
- Silver Lake Consortium to Acquire Nasdaq-Listed Qualtrics
Follow WSJ market coverage here
Opening Call:
Stock futures wavered on Monday as investors welcomed the authorities' attempts to stem banking sector angst.
"Investors are waiting with bated breath to see if this rush of regulatory activity to try and limit the fallout from the SVB bank collapse will help soothe volatile markets and so far the bold action appears to be working," Hargreaves Lansdown said.
Also supporting the more bullish mood were further sharp falls in short-duration government bond yields as investors made bets that the financial instability will encourage the Federal Reserve to ease its monetary tightening policy but that the fallout from the banking crisis will not damage the economy much.
The chances of the Fed hiking interest rates by 50 basis points next week have fallen over recent sessions from 70% to zero, according to action in Fed funds futures. The central bank is now expected to raise borrowing costs by 25 basis points as it strives to suppress inflation running at more than three times its 2% target.
"We believe the Fed's reaction function potentially needs to adjust...if the Fed continues to raise rates, the stresses on bank business models will grow," Fundstrat said.
Fundstrat added that it thinks the Fed "could move away from 'higher for longer' to a possible pause...Overall, this should be positive for stocks into the remainder of 2023, once we are past these initial after-shocks."
Stocks to Watch
Aehr Test Systems said it has a checking account at Silicon Valley Bank, which collapsed Friday, but it represents less than 6% of its $41.8 million in cash and short-term liquid assets. Shares edged up 0.4% in after-market trading.
Bank of America shares fell 5% premarket and Citigroup and JPMorgan Chase also retreated, after regulators announced emergency measures to ease fears depositors might pull their money from smaller lenders.
Saudi Arabia's Public Investment Fund is close to selecting Boeing as the initial aircraft supplier for a new national Saudi airline, WSJ reported. Boeing rose 1.4% in premarket trading.
Cingulate said it's offering around 8.6 million shares at an assumed combined public offering price of $1.45 each and accompanying warrant. Shares fell 26% in after-market trading.
First Republic Bank was falling 64% in premarket trading. The bank said Sunday it "further enhanced and diversified its financial position" through additional liquidity from JPMorgan and the Federal Reserve.
Illumina gained 2.6% after the Journal reported that Carl Icahn was preparing a proxy fight at the biotechnology company.
PacWest Bancorp shares were down 26% premarket and Western Alliance Bancorp fell 17%, as investor jitters spread to other regional lenders, after Signature Bank was closed by regulators on Sunday.
Provention Bio was soaring 262.5% to $24.29 after the U.S.-based biopharmaceutical company agreed to be acquired by France's Sanofi for $25 a share, or about $2.9 billion.
Roku was down 0.4% while Etsy gained 2.2% after the U.S. said depositors at Silicon Valley Bank would have access to all their funds on Monday.
American depositary receipts of HSBC fell 0.2% in premarket trading after the biggest bank in Europe agreed to buy the U.K. unit of Silicon Valley Bank in a deal brokered by the British government and the Bank of England.
SVB
The circumstances surrounding the collapse of the Silicon Valley Bank are unique so probably won't trigger a widespread financial contagion, Capital Economics said.
However, the failure is a timely reminder that when the Federal Reserve is singularly focused on taming inflation by increasing interest rates, it can end up breaking things, it said.
"While we still see a softish landing as the single most likely outcome...the risk of a severe recession and big rise in unemployment, which eventually forces the Fed to reverse course, [is] far higher than the risk of a 'no landing' scenario where the economy and financial markets continue to shrug off the impact of ever-higher rates."
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SVB's troubles leading to its demise were a combination of one of the largest hiking cycles in history, one of the most inverted curves in history, one of the biggest bubbles in tech bursting, and the runaway growth of private capital, according to Deutsche Bank.
"One can only imagine the contagion this story would bring if we also had a U.S. recession at the same time," Deutsche said.
However, that recession is still in the cards, with the SVB collapse after the usual boom-cycle bust script of too much stimulus, followed by high inflation and an asset bubble, then central-bank hikes, inverted curves, tighter lending standards and finally a recession, it added.
Forex:
The dollar fell as the banking crisis fears reduced the prospect of the Fed stepping up the pace of interest rate rises at its March 22 meeting, Swissquote Bank said.
"It is well possible that the Fed may simply forget about a 50 basis points hike this month or may not hike at all."
Activity in Fed funds futures now sees a more than 98% chance of a 25bp rate rise, in line with February's increase, following the collapse of SVB and Signature Bank in recent days, Swissquote said.
Bonds:
The recovery of long-dated government securities despite the continuing "hawkish" central bank signals is surprising at first glance and could be the early signs of fatigue in the bond-bearish momentum, but bond markets might not be on the recovery just yet, LBBW said.
"In our opinion, a technical counter-reaction to the previous sell-off also seems plausible," it added.
LBBW believes that it would be premature to attach too much weight to the recent price recovery. "It could be in part a technical byproduct of the strong movements in curve steepness."
Energy:
Oil edged higher in Europe thanks to a weaker dollar and as investors balanced hopes for Chinese demand with a weak outlook in the U.S.
"Oil markets are torn between factually robust data from the East and an expected run of soft data from the West, where hawkish Fed rhetoric has revived recession fears," SPI Asset Management said.
Metals:
Base metal and gold prices were pushing higher in early London trading after the Fed said it is stepping in to shore up confidence in the U.S. banking system following SVB's collapse.
It is a good sign that the U.S. government is working quickly to reduce systemic risk after the Fed, Treasury and Federal Deposit Insurance Corporation introduced a series of measures, including a backstop fund, to help restore confidence in the banking system, Peak Trading Research said.
Rate hike expectations have now fallen sharply with more banking rate stress likely to mean lower rates, Peak Trading added.
Gold
Gold's bullish momentum may persist after its price rose above the key technical resistance at $1,845/oz, although some caution over a possible false breakout should be taken, ANZ said.
The rise in gold's price has come following the U.S. employment report and the collapse of Silicon Valley Bank on Friday, it noted.
With gold having earlier risen above $1,850/oz, the precious metal's next resistance is at $1,960/oz, based on ANZ's technical analysis.
TODAY'S TOP HEADLINES
Chick-fil-A Wants to Serve Its Chicken Sandwiches in Asia and Europe
Chick-fil-A Inc. is reaching beyond North America with a $1 billion plan to take its signature crispy chicken-breast sandwich overseas.
The Atlanta-based company said it plans to open restaurants in Europe and Asia by 2026, with locations in five international markets by 2030.
Silicon Valley Bank's U.K. Arm to Be Bought by HSBC
HSBC will buy the U.K. subsidiary of Silicon Valley Bank for just over $1, after a frantic weekend for regulators who tried to find a way to protect the bank's depositors after its U.S. parent collapsed.
The deal meant the bank avoided being placed into insolvency, which the Bank of England had planned to impose if it couldn't find a buyer. The central bank said the sale would support confidence in the U.K.'s financial system.
Silver Lake Consortium to Acquire Nasdaq-Listed Qualtrics
U.S. private-equity firm Silver Lake and Canada Pension Plan Investment Board have agreed to acquire experience-management software company Qualtrics International Inc. in a deal that values the Nasdaq-listed company at around $12.5 billion.
The acquisition value includes purchasing all of SAP SE's majority stake for approximately $7.7 billion, SAP said in a statement Monday.
SVB, Signature Bank Depositors to Get All Their Money as Fed Moves to Stem Crisis
U.S. regulators took control of a second bank Sunday and announced emergency measures to ease fears depositors might pull their money from smaller lenders after the swift collapse late last week of Silicon Valley Bank.
The measures, which include guaranteeing all deposits of SVB, were designed to shore up wavering confidence in the banking system. They were jointly announced Sunday night by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.
Regulators Hold Auction for Silicon Valley Bank
Regulators are auctioning Silicon Valley Bank as part of a broader effort to contain the fallout from its failure on Friday.
Treasury officials confirmed the auction to lawmakers and staff on a call Sunday afternoon, according to people familiar with the matter, saying bids were expected by 2 p.m. Eastern Time.
Signature Bank Is Shut by Regulators After SVB Collapse
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03-13-23 0626ET
