Silicon Valley Bank Slams Global Stocks, US Payrolls Threaten

  • Crude oil eases growth problems
  • Silicon Valley Bank Troubles Hit Banks Globally
  • US non-farm payrolls before the opening bell on Wall St
  • US inflation figures threaten

LONDON, March 10 (Reuters) – Global shares hit a two-month low on Friday as investors dumped banks on fears of contagion following a Silicon Valley bank capital raise, with U.S. wages also in focus ahead of the Federal Reserve meeting later this month.

Crude oil was on course for its biggest weekly loss in five weeks on worries about the prospect of steep U.S. interest rate hikes slowing growth and hitting fuel demand.

The yen fell after the Bank of Japan kept stimulus settings steady, while the dollar held its breath ahead of US data.

The MSCI All Country share index (.MIWD00000PUS) fell 0.6%, hitting its lowest level since mid-January, while the STOXX (.STOXX) index of 600 companies in Europe fell 1.6%.

Silicon Valley Bank ( SIVB.O ) had sought to reassure technology clients on Thursday as its stock collapsed 60% as it tried to raise funds to plug a $1.8 billion hole caused by the sale of a loss-making bond portfolio.

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The news added to jitters from news that crypto-focused lender Silvergate ( SI.N ) was shutting down.

Silicon Valley Bank raised questions about the unrealized losses on bond portfolios among U.S. banks and what that could mean for capital requirements, analysts said.

Concerns rippled through lenders in Europe.

The STOXX index of European bank shares ( .SX7P ) fell 4.2% to its lowest level in more than a month, with Credit Suisse ( CSGN.S ) hitting a record low.

“I think it’s panic and it’s corporate-specific,” said Patrick Spencer, vice chairman of equities at RW Baird, adding that it was a further sign of how rising borrowing costs and the end of cheap money were shaping markets.

“We’re actually taking advantage of the panic-induced selling and we’re upgrading some of the regional banks,” he said.

A reclassification of the US S&P index next week will increase the number of banks in the benchmark to support the sector, Spencer said.

US non-farm payrolls were due before the opening bell on Wall Street, and economists have predicted they likely rose by 205,000 last month, less than half the huge 517,000 added in January.

“Anything more than 300,000 would blow the doors off the market,” Spencer said.

ING bank said US central bank chief Jerome Powell has explicitly referred to Friday’s jobs data as a key factor along with next week’s US inflation figures ahead of the Fed’s March 22 policy decisions.

Powell has warned that interest rates could rise further and faster if data show it is necessary to get inflation under control.

U.S. stock index futures were slightly weaker, although the payrolls numbers were likely to set the tone for the opening on Wall Street.

Fund Flows: Global Equity Sector Funds


The yen weakened and Japanese government bond yields fell after the Bank of Japan opted to keep stimulus settings steady at Governor Haruhiko Kuroda’s last meeting in charge, as expected.

The benchmark 10-year JGB yield, which the BOJ maintains within 50 basis points either side of zero, retreated sharply from that ceiling to finally sit at 0.445%. The yen was last down about 0.4% at 136.615 per dollar after kneeling as much as 0.6%.

Japan’s Nikkei (.N225) pared earlier losses to be down 1% after the central bank’s decision, but selling began later in the session and the index fell 1.7%.

The US dollar was little changed and yields on short-term government bonds were slightly weaker.

Fed Funds futures also rose sharply, pulling the market-implied peak in U.S. interest rates from above 5.6% to just below 5.5%, pricing in about a 50% chance of a 50 basis point Fed hike this month from more than 70% a day earlier.

Bitcoin fell 2% to $19,924 as the fallout from Silvergate’s demise weighs on broader sentiment in digital assets.

Brent crude futures fell 0.4% to $81.25 a barrel. barrel, while gold rose 0.2% to $1,835 a barrel. ounces.

(This story has been corrected to set the date for the next Fed meeting in Sections 1 and 15)

Reporting by Huw Jones, Tom Westbrook, Kevin Buckland and additional reporting by Scott Murdoch. Editing by Simon Cameron-Moore and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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