Focus on the US financial sector amidst fallout from SVB and Signature Bank collapses
|Asia market update: Focus on the US financial sector amidst fallout from SVB and Signature Bank collapses. Will contagion spread to other markets?; The world watches. Analysts downgrade expectations of further rate hikes.
General trend
- Most Asian markets opened lower on Monday due to nervousness about the chance of wider contagion from the collapse of Silicon Valley Bank on Friday in the US.
- Fears were heightened during the morning by the breaking news of another US bank, Signature Bank of NY, being seized by the FDIC due to liquidity issues.
- Then during the Asian morning session the US Fed emergency Bank Term Funding (Loan) Program (BTFP) was announced.
- This seemed to alleviate the worst fears of widespread bank runs in the US [for now?] and helped calm markets.
- US equity FUTs remain higher.
- Financials trade mixed in Asia; Australian and Japanese banks decline.
- Earlier, a string of companies reported their exposure or otherwise to SVB, with the vast majority reporting risks as being “non-material”. [These included Xero (New Zealand), Redbubble, Sezzle (Australia), Antengene, Zailab, BeiGene, Everest (China/Hong Kong), as well as some government spokespersons from Thailand, Japan, South Korea, New Zealand and Australia.].
- These followed on from similar weekend announcements out of Europe (Pharming Group NV),and the Bank of London regarding SVB’s UK unit, as well as crypto firms such as Tether and Kraken. All companies and countries assured investors that their banks and companies were not exposed or else materially exposed.
- Analysts around the world dampened their expectations for the rate of further rate increases in Australia, New Zealand and the US.; USD trades generally weaker; 2-year UST yield declines sharply.
- Metals supported by the weaker US dollar.
Headlines/economic data
Australia/New Zealand
- (AU) ASX 200 opens +0.1%.
- (AU) RBA odds for rate pause at April meeting rise to 60% in swaps market.
- (AU) Australia APRA: Re SVB fall out: Financial system is strong, intensifying supervision of local banking industry.
- (AU) Australia Feb Port Hedland Iron Ore Exports: 38.8Mts v 47.9Mt m/m.
- (NZ) RBNZ: Monitoring SVB situation closely.
- (NZ) Westpac: Expects RBNZ to raise the cash rate by 25bps in April (prior 50bps).
- (NZ) NZIER: New Zealand economists cut 2023-24 GDP est to 0.3% (prior 1.1%).
- (NZ) New Zealand Feb Food Prices M/M: 1.5% v 1.7% prior (the 12% annual increase is highest annual increase since Sep 1989).
- (NZ) New Zealand Feb Performance of Service (PSI) Index: 55.8 v 54.5 prior.
- (NZ) MBIE announces new plan to transform New Zealand’s advanced manufacturing sector.
- (NZ) Rabobank lowers 2022-23 Milk Price forecast to NZ$8.60/kg.
China/Hong Kong
- (HK) Hang Seng opens +0.5% at 19,411.
- (CN) Shanghai Composite opens -0.1% at 3,228.
- (CN) China President Xi gives concluding NPC speech: Promote high quality development.
- (CN) China Premier Li Qiang: Domestic economy shows trends of stabilizing and recovery; achieving 5.0% GDP growth target will not be easy. - first press conference as Premier.
- (CN) China Parliament officially approves Li Qiang as Premier; Appoints US-sanctioned general Li Shangfu as new Defence Min; Yi Gang to remain as PBOC Gov. [was speculated to retire in early 2023]; Liu Kun to remain as Finance Minster.
- (CN) China PBOC Open Market Operation (OMO): Sells CNY41.0B v CNY15.0B prior in 7-day reverse repos; Net injects CNY34.0B v drains CNY3.0B prior.
- (CN) China PBOC sets Yuan reference rate: 6.9375 v 6.9655 prior.
- (US) China reportedly privately suggested US to consider simultaneous VP Harris trip to China when and if House Speaker McCarthy decides to go to Taiwan, citing 1997 diplomatic plan – SCMP.
Japan
- (JP) Nikkei 225 opens -0.9% at 27,886.
- (JP) JAPAN Q1 BSI LARGE ALL INDUSTRY Q/Q: -3.0 V +0.7 PRIOR; LARGE MANUFACTURING Q/Q: -10.5 V -3.6 PRIOR.
- (JP) Japan Chief Cabinet Sec Matsuno: Does not see big impact on Japan financial companies from SVB fallout.
- (JP) Japan, South Korea business leaders to round table Friday, same day as PM's Kishida and Yoon – NHK.
- (JP) Newest Japan 10-yr JGB yield declines to 0.34% [lowest since Dec 20, 2022] amid safe haven demand, US banking concerns.
- (JP) Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 50bps; Opens window to buy unlimited amount of 10-year JGBs at 0.50% [as expected].
- (JP) Japan's Komeito Party seeks trillions of yen additional stimulus - NHK.
Korea
- (KR) Kospi opens +0.2% 2,400.
- (KR) South Korea March 1-10 Exports Y/Y: -16.2% - Customs Agency.
- (KR) Bank of Korea (BOK): SVB collapse could increase global market volatility.
Other Asia
- (TH) Thailand Government: Thai banks have no investments or transactions involving 2 US troubled banks.
- (VN) Vietnam Regulator inspects 11 lenders' bond investments - Dau Tu.
North America
- (US) Goldman Sachs (GS) Research: No longer expects Fed to raise rates at the Mar 22nd meeting; cites recent stress in the banking system.
- US FDIC seize control of NY Signature Bank, effective immediately; co. has $89B in deposits.
- (US) Fed announces new emergency bank term funding (Loan) PROGRAM ["BTFP"]; Assets valued at PAR.
- (US) US Federal Reserve and Treasury: Taking decisive actions to protect the US economy, consulting with President.
- (US) US Treasury: "sees some institutions" with issues similar to SVB - financial press.
- (US) Follow Up: Bill Ackman: More banks will likely fail despite Fed intervention.
- SVB Financial [SIVB]: SVB clients said to be in limbo after seeking 'refuge' in money-market funds - US financial press.
- Coinbase [COIN]: $240M cash balance at Signature Bank as of Friday - financial press.
Europe
- (UK) UK PM Sunak comments on SVB: Will have 'something' to say very shortly on SVB.
- Bank of London confirms formal proposal for UK unit of Silicon Valley Bank – press.
- Pharming Group NV (PHARM/NL) issues statement regarding events surrounding Silicon Valley Bank; $26M held in SVB US and $19M held in SVB UK and plans to actively work to recover cash deposited.
- (UK) Chancellor of the Exchequer (Fin Min) Hunt: UK is working at pace to minimise fallout from collapse of Silicon Valley Bank; Will bring forward immediate plans to help SVB customers with cashflow needs.
Levels as of 01:20 ET
- Nikkei 225, -1.4%, ASX 200 -0.5% , Hang Seng +2%; Shanghai Composite +0.8% ; Kospi -0.6%.
- Equity S&P500 Futures: +1.6%; Nasdaq100 +1.7%, Dax +0.9%; FTSE100 flat.
- EUR 1.0737-1.0642 ; JPY 135.05-133.53 ; AUD 0.6672-0.6578 ;NZD 0.6203-0.6130.
- Gold +0.9% at $1,884/oz; Crude Oil +0.5% at $77.03/brl; Copper +1.3% at $4.0565/lb.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.