MARKET WRAPS
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Today's Headlines/Must Reads
Credit Suisse Will Borrow Up to $53.7 Billion
U.S. Threatens to Ban TikTok if Chinese Founder Doesn't Sell Ownership Stake
Tech Stocks Appear to Be a Haven From the Banking Crisis, for Now
Why Top Washington Officials Agreed to a Bank Rescue
Bank Crisis Adds a Fresh Crack in Property's Foundations
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Opening Call:
A calmer mood across the European banking sector was underpinning sentiment on Thursday, although Dow & S&P futures were drifting into the red ahead of the opening bell.
A record rebound of up to 32% in Credit Suisse shares, after the beleaguered lender secured a $54 billion liquidity backstop from the Swiss central bank, has eased concerns, for now, that recent financial sector ructions will severely damage the global economy.
"For now, the move has restored a little stability to global markets, with the S&P 500 regaining ground [late Wednesday], once it appeared the Swiss National Bank was standing by to help," Hargreaves Lansdown said.
"Nerves are still frayed though and that has been evident during trade in Asia. Investors are trying to swim in a sea of red, as worries ripple around about where the next weakness in the global banking sector will rear up."
Read Eurozone Banking Sector Dynamism Should Mitigate Further US Banking Fallout
Traders have also been worried of late that banking sector instability will compromise central bankers' attempts to suppress inflation.
That will be put to the test when the European Central Bank will give its latest monetary policy decision. Expectations that the ECB would deliver a 50 basis point increase are now very much in the air just hours ahead of the decision.
Markets have become similarly unsure about whether or by how much the Federal Reserve will raise rates next Wednesday. The volatility in bond markets this is causing--as shown by the ICE BofAML MOVE index surging to its highest since the global financial crisis in 2008--has triggered great uncertainty among equity investors, too.
Fundstrat noted that the banking crisis had caused "technical damage" to the stock market, with fresh weakness in discretionary goods, materials and energy sectors as fears have risen about a sharper economic slowdown.
However, relative strength in the technology sector "is one of the few reasons why broader market averages have held up a bit better than what otherwise might have occurred."
"Yet, in the short run, it continues to be difficult to think stock indices have officially bottomed without proof."
Stocks to Watch
Adobe reported fiscal first-quarter earnings that topped its own guidance, as well as Wall Street estimates. The company also boosted its fiscal-year outlook. The stock rose 5% in after hours trading.
First Republic Bank, which fell 21.4% on Wednesday, was down 2% in premarket trading. Two ratings firms cut the bank's credit rating to "junk" on the risk that depositors could pull their funds from California-based bank.
Proterra was down 16% in premarket trading after warning it may not have enough liquidity at the end of the fiscal first quarter.
Snap and Meta Platforms rose 5% and 2%, respectively, after The Wall Street Journal reported the Biden administration has demanded Chinese tech company ByteDance sell the U.S. arm of TikTok or face a potential ban.
UiPath jumped 12% after fourth-quarter results topped expectations and the company issued revenue outlooks for the fiscal first quarter and year that also beat Wall Street estimates.
Forex:
The dollar's appreciation potential is likely to be limited despite demand for safe havens, as the banking crisis spills beyond the U.S., UniCredit Research said.
Falling long-term U.S. yields will probably put a brake on any dollar recovery after its recent losses, UniCredit added. It said the DXY dollar index will struggle to regain the recent peak of 105.88.
"This is also because the JPY is perceived as the leading safe-haven currency at present while the CHF has been penalized by evidence that the ongoing banking crisis is also beginning to involve Switzerland," UniCredit said, noting the troubles at Credit Suisse.
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The euro rebounded somewhat on the Credit Suisse funding news and ahead of the ECB decision.
Given banking concerns, the ECB may be cautious, MUFG Bank said.
"While the ECB's rate decision has the potential to have a significant impact on euro performance today, we expect it to be mainly driven by European bank equity performance in the coming days or even weeks."
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Stress in the European banking sector overshadowed the U.K. government's budget on Wednesday and may continue to drive sterling against the euro in the near-term, ING said.
The budget was "generally seen to strike the right notes" but it was hard to determine a sterling reaction given stress in financial markets, which sent EUR/GBP lower, ING said.
The European banking sector's performance will continue to determine EUR/GBP moves, although should the ECB credibly lift interest rates 50bps without unnerving banking stocks, EUR/GBP could rise above 0.8800, ING said.
Read Central Banks Face Difficult Balancing Act
Energy:
Oil prices gained around 1%, steadying after their slump this week.
"There is a real possibility that global economic growth may slow earlier and much more than expected. This implies that the [oil] demand growth trajectory would be much flatter into the rest of the year," TD Securities said.
"Crude could well move much lower than the fundamentals suggest, while systemic worries continue."
Metals:
Base metals were largely flat in early London trading, while gold futures were lower, following the turmoil in the financial sector on both sides of the Atlantic.
Noting the rise in Credit Suisse's share price after it announced significant borrowing from the Swiss Central Bank, Deutsche Bank said it would have to wait "to see if this will be enough to calm the market, but things are looking more positive than they did at the time of the European close yesterday."
TODAY'S TOP HEADLINES
Credit Suisse Will Borrow Up to $53.7 Billion
Credit Suisse Group AG, the Swiss bank whose shares tumbled Wednesday as fears about the health of global banks jumped the Atlantic Ocean, said it would exercise its option to raise as much as 50 billion Swiss francs, equivalent to $53.7 billion, from the Swiss National Bank in a bid to stanch liquidity concerns.
The firm, based in Zurich, called the decision a "decisive action to pre-emptively strengthen its liquidity."
U.S. Threatens Ban if TikTok's Chinese Owners Don't Sell Stakes
WASHINGTON-The Biden administration is demanding that TikTok's Chinese owners sell their stakes in the video-sharing app or face a possible U.S. ban of the app, according to people familiar with the matter.
The move represents a major shift in policy on the part of the administration, which has been under fire from some Republicans who say it hasn't taken a tough enough stance to address the perceived security threat from TikTok, owned by Beijing-based ByteDance Ltd.
Tech Stocks Appear to Be a Haven From the Banking Crisis, for Now
Technology stocks have remained relatively insulated from the turmoil rattling financial markets. How long that lasts is anyone's guess.
The tech and communication services groups in the S&P 500-home to the likes of Apple Inc., Microsoft Corp. and the parent companies of Facebook and Google-have climbed 2.3% and 2.9%, respectively, in March, extending their 2023 gains.
Mitel Minority Lenders Sue Over Rivals' Debt Restructuring
A group of minority lenders to Mitel Networks Corp. is suing Apollo Global Management Inc., Anchorage Capital Group and other rival creditors, alleging the Canadian communication company's private-equity owner favored the interests of its majority lenders in a restructuring deal.
The plaintiffs, which include Bardin Hill Investment Partners LP, Benefit Street Partners LLC and other investment firms, allege they were "gutted" when Mitel improperly amended its credit agreements without their consent to push their loans down in the restructuring deal's creditor pecking order behind $857 million in newly issued debt.
Courts Side With Big Companies Including Amazon and Experian in Privacy Appeals
Big companies are winning appeals to overturn regulatory decisions that allege they violated European privacy rules, potentially carving out a path for more businesses to challenge similar sanctions.
Courts in the U.K., Spain, Italy and Germany sided with companies including Experian PLC, Amazon.com Inc. and Italian energy giant Enel SpA in recent rulings, in some cases striking down multimillion-dollar fines and reaffirming companies' arguments that their data practices comply with the General Data Protection Regulation.
Couche-Tard to Acquire Europe Assets From TotalEnergies in EUR3.1 Billion Deal
Canadian convenience-store operator Alimentation Couche-Tard Inc. has made an offer to acquire retail assets in Europe from energy company TotalEnergies SE for 3.1 billion euros ($3.28 billion).
Under the proposed deal, Couche-Tard will take over TotalEnergies' retail networks in Germany and the Netherlands, comprising more than 1,500 service stations, the companies said in news releases on Thursday.
Why Top Washington Officials Agreed to a Bank Rescue
For more than a decade after the collapse of Lehman Brothers in 2008, Washington's regulatory watchdogs sought to ensure that they would never again face fraught weekend deliberations about propping up the financial system from a bank failure.
Last weekend, they did.
Bank Crisis Adds a Fresh Crack in Property's Foundations
The relationship between banking and real estate may be about to take a toxic turn.
(MORE TO FOLLOW) Dow Jones Newswires
03-16-23 0614ET
