Asia shares skittish as banks face default stress

SYDNEY (Reuters) – Asian stock markets struggled on Monday, but U.S. and European stock futures markets continued to thrive even as default premiums approached dangerous levels as regulators pushed global banks It rose on expectations that they were working to put a fence stress on the system.

Tensions eased after reports that First Citizens BankShares (FCNCA.O) was in talks to buy Silicon Valley Bank (SIVB.O) from the Federal Deposit Insurance Corporation.

S&P 500 futures were up 0.3% and Nasdaq futures were up 0.2%. Eurostoks 50 futures were up 0.9% and FTSE futures were up 0.6%.

Japan’s Nikkei (.N225) rose 0.3% while South Korea (.KS11) fell 0.5%. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) also fell 0.7%, led by his 0.5% decline in Chinese blue chips (.CSI300).

Mood remains mixed after Deutsche Bank’s (DBKGn.DE) share price fell 8.5% on Friday and, like many other banks’ credit default swaps (CDS), bond insurance premiums surged against default risk. remained stable.

“Current levels of European bank credit default swaps are slightly lower than at the peak of the European financial crisis in 2013,” said Naeem Aslam, chief investment officer at Thee Capital Markets. rice field.

“If these CDSs don’t normalize, the stock market will likely be in trouble for days.”

In the United States, depositors are fleeing smaller banks in search of larger banks and money market funds. Money market fund inflows increased by more than $300 billion in the past month, reaching a record high of $5.1 trillion.

Minneapolis Fed President Neil Kashkari said he was watching “very, very closely” to see if bank stress could lead to a credit crunch and plunge the economy into recession.

This means the Fed is nearing a peak in interest rates, he added. The first rate cut could come as early as July, but the market is well ahead of the central bank in that he has already peaked at a chance rate of around 80%.

Federal Reserve Governor Philip Jefferson will speak later on Monday, while Federal Reserve Vice Chairman Michael Barr will testify in the Senate on Tuesday about “monitoring banks.”

Yields on two-year government bonds have fallen 102 basis points so far this month to 3.77%, but the overall yield curve has reached 30 years, below the effective funds ratio of 4.85%.

The plunge could drag the dollar down, at least against the safe-haven Japanese yen at ¥130.85, which hit a seven-week low of ¥129.65 last week.

The euro reversed on Friday amid concerns over Germany, finishing at $1.0764, well below last week’s high of $1.0930.

The drop in yields has been combined with gold, which was trading at $1,975 an ounce after hitting a high above $2,009 last week, is scouring out of risk.

Oil prices fell again, losing almost 10% for the month as concerns over global economic growth weakened commodities in general.

Brent fell 14 cents to $74.85 a barrel and US crude fell 10 cents to $69.16 a barrel.

Reported by Wayne Cole.Editing by Sam Holmes and Jacqueline Wong

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