US equity futures rose and the dollar declined on Monday in Asia trading after regulators weighed in to shore up the banking system and said depositors of collapsed tech sector lender Silicon Valley Bank would be fully repaid.
The US Federal Reserve on Sunday announced emergency funding measures to ensure “banks have the ability to meet the needs of all their depositors” following the second-largest bank failure in US history.
Futures markets tipped the benchmark S&P 500 index to open 1.7 per cent higher and the Nasdaq 100 to rise 1.8 per cent.
European futures also pointed higher, with contracts for the Euro Stoxx 50 up 0.4 per cent. Futures markets are relatively illiquid and sensitive to changes in news and sentiment.
The dollar dropped 0.8 per cent against a basket of other currencies during morning trading. The pound rose 0.8 per cent to $1.212.
Equities in Asia were mixed. Japan’s Topix was down 2 per cent at midday after falling 1.5 per cent in the first 10 minutes of trading.
Shares in SoftBank, which is seen among Japanese companies as potentially the most exposed to the unfolding crisis, were down 2.2 per cent.
“So far, it’s just looking like a regular bad day for Tokyo. Nothing crazy, but clearly low appetite for risk and a chance things could turn worse any minute,” said one Tokyo-based broker.
US regulators closed SVB, a crucial financial institution for start-ups, on Friday after customers rushed to withdraw $42bn — a quarter of total deposits — in a single day.
The Fed announced a new lending facility over the weekend, part of efforts by regulators including Treasury secretary Janet Yellen to avoid spillovers across the financial system.
SVB also played an important function in China’s dollar-based ecosystem for funding fledgling companies, according to industry insiders, with companies holding money at the bank before bringing it onshore to mainland China.
Hong Kong’s Hang Seng index added 2 per cent and mainland China’s CSI 300 rose 0.9 per cent on Monday.
At an annual session of parliament on Sunday, Beijing announced it was keeping the head of the central bank and finance minister in their posts. China’s credit growth in February was also higher than expected, bolstering economic recovery hopes.
Shanghai Pudong Development Bank, which owns a stake in a joint venture with Silicon Valley Bank’s China unit, lost 1.1 per cent.
One large Tokyo-based fund manager said the perception going into the week was that the SVB resolution appeared to ease fears of a domino effect.
But another trader in Tokyo said despite the fact that US futures were now rising, traders remained cautious as investors locked in gains from the previous five sessions and braced for further news.
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