Futures fall as Credit Suisse rescue, liquidity steps fail to quell bank scare

Futures fall as Credit Suisse rescue, liquidity steps fail to quell bank scare

Traders are largely expecting the Federal Reserve to hit pause on rate hikes at its two-day meeting that ends on Wednesday, as the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) snowballs into a bigger financial crisis.

Wall Street’s main indexes tumbled on Friday, with the Nasdaq and S&P 500 losing about 1%, but the indexes ended with large weekly gains.

Over the weekend, UBS agreed to buy rival Credit Suisse for $3.23 billion in stock and agreed to assume up to $5.4 billion in losses, in a shotgun merger engineered by Swiss authorities to avoid more market-shaking turmoil in global banking.

U.S.-listed shares of Credit Suisse and UBS were down 59.6% and 12.5%, respectively, in premarket trading.

Separately, top central banks, faced with the risk of a fast-moving loss of confidence in the financial system’s stability, moved on Sunday to bolster the flow of cash around the world.

Back home, the Fed offered daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the eurozone would have the dollars needed to operate.

“With concerns over U.S. and European banks likely to be still front of mind there is certainly a case for central banks to be cautious about the message they send about future rate rises,” said Michael Hewson, chief market analyst at CMC Markets UK.

“A rate cut this week is unlikely, and could even be unwise as it would suggest that the current problems are even more serious than markets currently believe.”

Big U.S. banks like JP Morgan Chase (NYSE:JPM) & Co, Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) slumped over 1% premarket.

Regional banks First Republic Bank (NYSE:FRC) and Western Alliance (NYSE:WAL) were down 21.6% and 5.3%, respectively, while PacWest Bancorp was up 3.2%.

The S&P Banking index and the KBW Regional Banking index on Friday logged their largest two-week drop since March 2020.

Treasury yields edged lower on Monday, with investors flocking to bonds on worries over the interest-rate path the U.S. central bank may take.

At 4:35 a.m. ET, Dow e-minis were down 316 points, or 0.99%, S&P 500 e-minis were down 38 points, or 0.96%, and Nasdaq 100 e-minis were down 89 points, or 0.7%.

Economic data such as existing home sales, weekly jobless claims and durable goods will also be on investor’s radar for the week.

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