LONDON (Reuters) – Global stocks hit a two-month low on Friday as investors dumped banks amid fears of contagion spreading after a capital raise at a Silicon Valley bank, with an eye on US jobs numbers ahead of a Federal Reserve meeting later. Month.
Crude oil was heading for its biggest weekly loss in five weeks amid concerns that sharp interest rate increases in the United States could slow growth and hit fuel demand.
The yen fell after the Bank of Japan kept its stimulus settings steady, while the dollar held its breath ahead of US data.
The MSCI All Country Stock Index (.MIWD00000PUS) fell 0.6%, hitting its lowest level since mid-January, while in Europe, the STOXX (.STOXX) of 600 companies fell 1.6%.
Silicon Valley Bank (SIVB.O) on Thursday sought to reassure technology clients as its stock plunged 60% as it tried to raise funds to bridge a $1.8 billion gap caused by selling a loss-making bond portfolio.
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The news exacerbated jitters from the news that cryptocurrency-focused lender Silvergate (SI.N.) has closed.
Silicon Valley Bank has raised questions about unrealized losses in US interbank bond portfolios, and what that might mean for capital requirements, analysts said.
Concern spread through lenders in Europe.
The STOXX European Banks Index (.SX7P) fell 4.2% to its lowest level in more than a month, with Credit Suisse (CSGN.S) hitting an all-time low.
“I think the panic is about a specific company,” said Patrick Spencer, vice president of equity at RW Baird, adding that it was another sign of how rising borrowing costs and the end of cheap money are shaping markets.
“We’re actually taking advantage of the panic selling and modernizing some of the regional banks,” he said.
Spencer said that the reclassification of the US Standard & Poor’s index next week will increase the number of banks in the benchmark index to support the sector.
US non-farm payrolls were due before the opening bell on Wall Street, and economists predict that they probably increased by 205K last month, less than half the whopping 517K added in January.
“Anything over 300,000 people is going to blow the market off,” Spencer said.
ING Bank said US Federal Reserve Chairman Jerome Powell had explicitly pointed to Friday’s jobs data as a key driver, along with US inflation numbers next week, ahead of the Fed’s policy decisions on March 22.
Powell warned that rates could rise further and faster if the data showed that inflation needed to be brought under control.
US stock index futures were slightly weaker, although the jobs numbers are likely to set the tone for the opening on Wall Street.
Fixed Japanese tonic
Yen Weakened Japanese government bond yields fell after the Bank of Japan chose to keep stimulus settings steady at Governor Haruhiko Kuroda’s latest meeting, as expected.
The benchmark 10-year Japanese government bond yield, which the Bank of Japan has set at 50 basis points on both sides of zero, fell sharply from that ceiling to remain at 0.445%. The yen last fell by 0.4% to 136.615 per dollar, after a sharp decline of 0.6%.
Japan’s Nikkei (.N225) trimmed previous losses to drop 1% after the central bank’s decision but selling started later in the session and the index fell 1.7%.
The US dollar was little changed and the yield on short-term Treasury notes was a bit weaker.
Fed fund futures also rose strongly, pushing peak implied US interest rates from above 5.6% to just below 5.5%, and pricing in about a 50% chance of a 50 basis point Fed increase this month, down from more than 70. %. earlier today.
Bitcoin fell 2% at $19,924 as the fallout from Silvergate’s demise weighed on the broader mood in the digital asset.
Brent crude futures fell 0.4% to $81.25 a barrel, while gold rose 0.2% to $1,835 an ounce.
(This story has been corrected to schedule the next Federal Reserve meeting in paragraphs 1 and 15.)
Additional reporting by Hugh Jones, Tom Westbrook, Kevin Buckland and Scott Murdoch. Editing by Simon Cameron Moore and Kim Coghill
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