SINGAPORE (Reuters) – A volatile day looms in Asia on Monday, as investors’ relief at a rescue deal for Credit Suisse and co-ordinated support from global central banks was tinged with nerves over how deep troubles run in the world’s banking and financial system.
S&P 500 futures rose 0.2% in bumpy early trade. In the thin morning hours of currency trade, the U.S. dollar was marginally weaker on the euro. The safe-haven yen was steady.
In a little over a week, the fallout from the collapse of Silicon Valley Bank – which has roiled confidence in the banking system – has brought a globally systemic lender to its knees.
Over the weekend, UBS said it will buy Credit Suisse for 3 billion francs ($3.2 billion) and assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities.
Central banks including the U.S. Federal Reserve, the European Central Bank and Bank of Japan pledged to deepen support for liquidity, by increasing the frequency seven-day dollar-swap operations from weekly to daily.
“The best we can say was there are certainly a lot of concerns about Credit Suisse contagion risk,” said Rodrigo Catril, a senior currency strategist at National Australia Bank in Sydney.
“The news overnight from Switzerland has helped,” he said, though added that the central bank moves had calmed as well as created nerves.
“It’s the irony of good news reflecting how bad things are. It’s great we’re seeing this concerted effort from central banks, and it’s positive, but it does also highlight how troubling the circumstances are and how worried central banks appear to be as well.”
U.S. 10-year Treasury bond June futures fell 19 ticks in early trade. U.S. interest rate futures bounced around either side of flat, as investors try and figure out what moves to contain bank wobbles mean for global interest rates.
Pricing implies about a 60% chance that the Fed hikes rates at its meeting later in the week, but has also priced in several rate cuts by the end of the year.
Stockmarkets were yet to open in Asia. In foreign exchange trade the Swiss franc, which took a beating as worries about Credit Suisse grew last week, rose about 0.4% to 0.9264 to the dollar.
The yen traded steady at 131.87 per dollar. The euro rose 0.1% to $1.1067.
(Reporting by Tom Westbrook; Editing by Sam Holmes)
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