Wall Street mostly higher after SVB assets deal as FTSE closes in the green
The FTSE 100 and European stocks finished higher this Monday after the deal for Silicon Valley Bank eased concerns about the banking sector.
The FTSE 100 (^FTSE) rose 0.88% to close at 7,468 points, while the CAC 40 (^FCHI) in Paris advanced 0.80% to 7,071 points. In Germany, the DAX (^GDAXI) climbed 1.05% to 15,114.
SVB deal soothes broader markets
A buyer has been found for Silicon Valley Bank (SVB), the troubled US regional lender which sparked global turmoil in the banking sector following its sudden collapse earlier this month.
First Citizens Bank will acquire Silicon Valley Bank’s loans and deposits from the Federal Deposit Insurance Corporation (FDIC) and will operate its 17 branches, US regulators announced this Monday.
They estimate the lender’s collapse would lead to $20bn (£16.3bn) of losses for a deposit insurance fund paid for by banks.
"You sweep Silicon Valley off to another buyer, which is good," said IG Markets analyst Tony Sycamore in Sydney.
"But the bigger issue is guaranteeing deposits at all those other (regional) banks...it's a little bit of calm before the next storm."
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SVB, a key lender to the tech industry since the 1980s, became the biggest US bank to fail since 2008 when regulators seized it after a sudden run on deposits.
Its UK arm was bought by HSBC (HSBA.L) for £1 in the days afterwards.
Victoria Scholar, head of investment at Interactive Investor, said: "Around $119bn of SVB’s deposits and $72bn of assets will be taken on by First Citizens Bank while $90bn of assets will remain with the FDIC, costing the insurance fund around $20bn.
"First Citizens has a history of acquiring embattled lenders in FDIC supported deals. SVB’s losses on its bond portfolio losses and the acceleration of customer withdrawals prompted jitters across the sector. Since its collapse on 10 March, the banking sector has been under pressure, exacerbated by the turmoil at Credit Suisse (CS) which was salvaged in a rescue deal from UBS (UBS).
"This has sparked contagion fears with shares in Deutsche Bank (DBK.DE) tumbling as much as 14% at one stage during Friday’s session amid nervousness about its exposure to commercial property and derivatives, sending the cost of insuring against its bonds sharply higher."
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Meanwhile, the chairman of Saudi National Bank (1180.SR) has resigned days after comments he made shortly before Credit Suisse's rescue.
Ammar Al Khudairy is leaving "due to personal reasons" and will be replaced by chief executive Saeed Mohammed Al Ghamdi, according to a statement.
Shares in Credit Suisse fell to a record low after Al Khudairy said during an interview that Saudi National Bank would "absolutely not" be open to further investments in Credit Suisse if there was another call for additional liquidity.
Saudi National Bank confirmed to CNBC last week that it had been hit with a loss of around 80% on its investment in Credit Suisse.
BREAKING: The chairman of Saudi National Bank — Credit Suisse's largest shareholder — resigns after his comments helped spark a slump in the Swiss lender https://t.co/F927vIrS6o pic.twitter.com/S2v7UOBDJ8
— Bloomberg Middle East (@middleeast) March 27, 2023
US and Asia
Wall Street pushed higher on the back of the SVB deal, with bank sentiment gaining momentum Monday morning
The Dow Jones (^DJI) rose 0.53% to 32,409 points. The S&P 500 (^GSPC) climbed 0.18% to 3,978 points but the tech-heavy NASDAQ (^IXIC) lost 0.27% to 11,792.
Regional bank stocks trading higher on Monday included First Republic Bank (FRC), PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), Zions Bancorporation (ZION), and Regions Financial (RF).
In Asia, Tokyo’s Nikkei 225 (^N225) rose 0.33% to 27,476 points, while the Hang Seng (^HSI) in Hong Kong slipped 0.99% to 19,718. The Shanghai Composite (000001.SS) also lost ground, falling 0.44% to 3,251 points.
Back in London, bank shares were among the leading risers, with Barclays (BARC.L) rallying 2.61%, Lloyds (LLOY.L) up 1.31%, and NatWest (NWG.L) gaining 0.50%.
"Investors better understand the problems facing American banks today are not remotely similar to the subprime mortgage crisis when underwater borrowers defaulted on loans en masse," Stephen Innes, managing partner at SPI Asset Management, said.
"Instead, banks are warehousing long-duration high-quality paper but fund the book at higher short-term rates; hence they are bleeding profits on mismatched interest rate positions," he added.
Standard Chartered (STAN.L) was muted after agreeing to sell its Jordanian business. The lender said it would sell the business to Arab Jordan Investment Bank (AJIB) as part of its plan to narrow its focus to faster-growing markets in the region.
Craig Erlam, senior market analyst, UK & EMEA, OANDA, commented: “It's been a relatively calm start to the week, with investors seemingly relieved that the weekend brought no fresh turmoil in the banking sector.
“That was clearly the fear going into it on Friday, with Deutsche Bank being hit particularly hard amid concerns it could be next in the firing line even if the fundamentals didn't necessarily back that up.
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“Anxiety is going to remain until we have a few weeks of calm and despite the small frenzy on Friday, I think we can say that the first of those is now behind us. That isn't to say that I think the storm has passed, just that the panic of the last few weeks may subside and allow for a more rational market to re-emerge. Or perhaps I'm being too hopeful for a Monday.
Shares in AstraZeneca (AZN.L) rose 1.65% after it announced positive high-level results from its Neuro-TTRansform phase III trial for eplontersen.
Pound vs dollar
The pound (GBPUSD=X) inched up against the dollar as traders expect more increases in interest rates from the Bank of England.
Money markets imply there will be another 34 basis points of interest rate increases from the Monetary Policy Committee before they stop raising borrowing costs.
Against the dollar, the pound was up 0.46% and was heading in the direction of $1.23.
Sterling (GBPEUR=X) also gained against the euro as confidence appears to be returning to the European markets and banks, with the pound trading at €1.14.
Meanwhile, Brent crude (BZ=F) advanced and was trading at around $76 per barrel, amid easing concerns about turbulence in the banking sector and renewed optimism around demand from China, the world’s biggest crude oil importer.
Watch: Silicon Valley Bank acquired by First Citizen Bank
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