Global Markets: Global equities gain, as rising bond yields pressure gold

Resona Holdings

14/03/2023 18:59

(Updates comment, prices)

        * 
      Global shares gain for first time in six sessions 
    

        * 
      Euro zone, U.S. yields jump on shifting rate outlook
    

        * 
      Crude oil futures drop $3 a barrel
    

  
    By Chris Prentice and Amanda Cooper
       NEW YORK/LONDON, March 14 (Reuters) - Global shares
stemmed a five-session rout on Tuesday as bank shares rebounded
and key U.S. inflation data was in line with expectations,
bolstering bets of a smaller interest rate hike by the Federal
Reserve at its meeting next week.
    Bond yields in the U.S. and the euro zone rose after
plunging the previous day, curbing a crisis-driven rally in
gold. 
        Crude oil futures tumbled by $3 a barrel, and U.S.
prices hit their lowest since December.
  
    Data showed the U.S. Consumer Price Index (CPI) rose 0.4% in
February versus 0.5% a month earlier. On a yearly basis, it rose
6.0% in February, compared with 6.4% in January.
    U.S. Treasury yields moderately extended gains following the
data, indicating some expectation that the Fed could continue to
raise rates but at a gradual pace.  US/ 
        "The CPI report although in line and not perfect did not
scream that they have no choice but to raise. The Fed still has
options, which is a good thing," said Jamie Cox, managing
partner for Harris Financial Group in Richmond, Virginia.
  
        Tuesday's broad gains in equity markets signaled a
"relief rally," he said.
  
        The Dow Jones Industrial Average  .DJI  rose 82.93
points, or 0.25%, to 31,899.22, the S&P 500  .SPX  gained 33.43
points, or 0.87%, to 3,889.19, and the Nasdaq Composite  .IXIC 
gained 148.02 points, or 1.32%, to 11,336.22 by 2:14 p.m. EDT
(1817 GMT).
  
        U.S. 
    bank stocks
     jumped, recovering some ground after the failure of Silicon
Valley Bank and Signature Bank triggered heavy selling by
investors.
  
    European shares  .STOXX  closed up 1.53%, notching their
largest one-day gain since December and marking the first gain
in four sessions.  .EU 
        European banks  .SX7P  rebounded 2.5%, one day after
their largest one-day sell-off in over a year.
  
        The MSCI All-World index  .MIWD00000PUS  reversed early
losses to advance 0.35%, gaining for the first in six sessions. 
  
    As recently as a week ago, investors were just recovering
from a reality check that prompted many to assume rates around
the world were likely to head much higher and stay there for
longer than previously expected.
        "The 50-basis-point hikes are off the table for now.
Markets are too fragile," Harris Financial Group's Cox said in a
phone interview.
  
    In under a week, three U.S. banks have collapsed. It was the
failure of technology-sector lender Silicon Valley Bank (SVB)
that rattled investor confidence and triggered a rush into
safe-haven assets like bonds and gold.
        On Tuesday, ratings agency Moody's 
    cut its outlook
     on the U.S. banking system to "negative" from "stable."
  
    Banking stocks around the world have shed hundreds of
billions of dollars in value in a matter of days, while the
government bond market has seen one of its biggest rallies in
decades.
    The two-year Treasury yield  US2YT=RR , which rises with
traders' expectations of higher Fed fund rates, touched 4.2797%
compared with a U.S. close of 4.03% after Monday's largest
one-day drop since 1987.
        Germany's two-year yield  DE2YT=RR  rose 22.5 basis
points to 2.928% after falling by 37 basis points a day earlier.
It was not far from levels seen at the end of February.
 urn:newsml:reuters.com:*:nL8N35M1LR
  
        Expectations for the peak of the ECB deposit rate
dropped to around 3.4% on Monday from 4.1% last Thursday, with
markets betting central banks would soften their policy stance
as they assess financial stability risks.
  
    Many have drawn parallels to the 2008 financial crisis, when
indicators of financial market stress shot up and equities
crumbled. But Societe Generale chief currency strategist Kit
Juckes said the current situation was far more like the U.S.
savings and loans crisis of the 1980s, in which hundreds of
smaller banks folded when the Federal Reserve jacked up interest
rates to control inflation.
    SVB, which was the 16th biggest U.S. bank at the end of last
year, is the largest lender to fail since 2008. The sharp rise
in Fed rates in the last year, which tightened financial
conditions in the startup space in which SVB was a notable
player, was front and center.
    "I don't think this is a systemic global banking issue. If
it's an issue, it's an issue of a smaller but less regulated
bank that has been growing very fast on the back of being less
regulated in a stable environment that has turned nasty," Juckes
said.
    Overnight the VIX  .VIX  volatility index, nicknamed Wall
Street's "fear gauge," neared six-month highs, and other
indicators of market stress showed early signs of strain. An
index of bond market volatility - the ICE BofA MOVE index
 .MOVE  - had hit a 14-year high by Monday's close.
        The euro  EUR=  was up 0.1% on the day at $1.0736,
having gained 1.51% in a month, while the dollar index  =USD ,
which tracks the greenback against a basket of currencies of
other major trading partners, was down at 103.63.
  
        The dollar rose 0.8% against the yen to 134.24  JPY= ,
with the yen pressured as recent safe-haven flows and Treasury
yields reversed.  urn:newsml:reuters.com:*:nL1N35M1SW
  
        Gold's safe-haven rally also dried up on Tuesday in the
face of higher Treasury yields. Spot gold prices  XAU=  fell
0.3% to $1,907.58 an ounce. 
  
        Oil prices were down on lingering concerns that a fresh
financial crisis could reduce future oil demand.
  
        West Texas Intermediate crude futures  CLc1  fell 3.96%,
or $2.97, to $71.83 a barrel. Brent crude  LCOc1 , the global
benchmark, fell 3.63%, or $2.93, to $77.84  O/R 
  
        Bicoin hit a nine-month high, taking gains past 30% in
four sessions.  urn:newsml:reuters.com:*:nL8N35M4PM
  
         New York’s financial regulator said its decision to
close Signature Bank  SBNY.O  had “nothing to do with crypto."
 urn:newsml:reuters.com:*:nL1N35M1UT
  

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 (Reporting by Tom Westbrook  Editing by Sonali Paul, Mark
Potter and Leslie Adler)
 ((tom.westbrook@tr.com; +65 6973 8284;))
 
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