U.S. stock futures rose in Asian trade on Monday in relief at a weekend rescue deal for Credit Suisse, though the mood was nervous and financial shares remained under pressure from contagion fears, even with support from global central banks.
S&P 500 futures rose 0.5% in bumpy early trade. Japan’s Nikkei futures bounced 0.6%.
Currency markets were broadly steady while U.S. interest rate futures fell, as investors pushed U.S. rate expectations a bit higher ahead of a Federal Reserve meeting on Wednesday.
U.S. Treasury futures fell and early indicators pointed to volatile day for cash bonds.
Among equities, falls for Australian bank stocks led the S&P ASX 200 (.AXJO) down 0.8% in morning trade, with the financial index (.AXFJ) down 1.4%.
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 Fed, the European Central Bank and Bank of Japan pledged to deepen support for liquidity, by increasing the frequency of 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.”
At least two major banks in Europe are examining scenarios of contagion in the region’s banking sector and are looking to the Fed and the ECB for stronger signals of support, two senior executives close to the discussions told Reuters.
Concern remains elevated, too, about regional banks in the United States. On Sunday First Republic (FRC.N) had its credit rating pushed deeper into junk status by S&P Global and elsewhere efforts to raise capital are hitting difficulties.
U.S. 10-year Treasury bond June futures fell 19 ticks in early trade 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.
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.