As Fears In The Banking Sector Subside, Stocks Are Expected To Open Higher

The June Nasdaq 100 E-Mini futures (NQM23) and S&P 500 futures (ESM23) are up +0.34% and +0.15%, respectively, this morning as market players reacted favorably to the news that The first Citizens BancShares had agreed to purchase Silicon Valley Bank's deposits and loans.

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Wall Street's major averages ended the trading day on Friday slightly higher after recovering from an early decline as bank stocks rose following a statement from the Financial Stability Oversight Council, which Treasury Secretary Yellen had convened, that "while some organizations have arrived under strain, the U.S. financial system remains sound and resilient." At the same time, investors kept betting that the Fed would stop raising interest rates at the next meeting.

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The Federal Deposit Insurance Corporation announced in a statement on Monday that First Citizens BancShares Inc (FCNCA) had reached an agreement to purchase the majority of Silicon Valley Bank's deposits and loans. The agreement included the purchase of SVB assets for about $72 billion at a $16.5 billion discount. The lender added that it will accept $56 billion in deposits. The FDIC also obtained equity development rights in First Citizens' stock, which has a maximum value of $500 million.

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The weekend before last, Trade Algo reported that American regulators were investigating methods to extend an emergency lending program for banks that may give First Republic Bank more time to strengthen its balance sheet. The Federal Reserve's emergency loan program extension is just one of several alternatives that officials are considering at this early stage of the discussions, according to Trade Algo, which cited people with knowledge of the matter.

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Neel Kashkari, president of the Minneapolis Fed, stated that the recent bank crisis has taken the United States closer to recession in remarks made on CBS's Face the Nation on Sunday. It undoubtedly makes us closer. Uncertainty exists regarding the extent to which these banking pressures are causing a generalized credit crunch. The credit crisis... would cause the economy to weaken. We are keeping a very close eye on this, according to Kashkari.

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The U.S. core private spending expenditures price index reading for February, the Fed's favored inflation indicator, will be the primary event in the upcoming week. Market investors will also be watching a slew of economic data, particularly that from the United States. Goods Trade Balance (preliminary), Wholesale Inventories (preliminary), S&P/CS HPI Composite - 20 n.s.a., Richmond Manufacturing Indicator, Pending Home Sales, Crude Oil Inventories, GDP, GDP Price Indicator, Initial Jobless Claims, PCE Price index, Personal Revenue, Personal Spending, Chicago PMI, Michigan Consumer Expectations, and Michigan Consumer Sentiment are among the statistics that are included in this report. 

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Also, a number of Fed representatives will appear this week, including governors Christopher Waller and Lisa Cook, Richmond Fed President Tom Barkin, and Boston Fed President Susan Collins.

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On Monday, the U.S. economic data calendar is largely barren. Investors, meanwhile, are expected to pay close attention to Fed Governor Philip Jefferson's speech in search of new information on the outlook for rates.

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United States 10-Year rates are at 3.441% in the bond markets, up +1.88%.

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The recovery in local bank equities following the announcement that First Citizens BancShares Inc. had reached an agreement to acquire Silicon Valley Bank's deposits and loans has contributed to this morning's +0.93% gain in the Euro Stoxx 50 futures. Christine Lagarde, president of the European Central Bank, also informed the leaders of the European Union on Friday that the robust regulatory framework is one reason why the banking sector in the Eurozone is still in good shape. In business news, Novartis Ag (NOVN.Z.IX) increased more than +6% as the Swiss pharmaceutical company announced encouraging trial results for its breast cancer medication Kisqali.

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Today saw the release of the Eurozone's M3 Money Supply data as well as the Ifo Business Climate Index for Germany, the Current Assessment for Germany, and the Business Expectations for Germany.

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German March expectations were higher than expected at 91.2 compared to 88.3.

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German March Current Assessment was greater than anticipated at 95.4, coming in at 95.4.

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German Ifo Business Climate Index for March was announced at 93.3, higher than anticipated at 91.0.

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The M3 Money Supply for the Eurozone in February came in at 2.9% y/y, below the forecast of 3.2% y/y.

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Today's Asian stock markets ended in a mixed bag. Japan's Nikkei 225 Stock Index (NIK) closed up +0.33%, while China's Shanghai Composite Index (SHCOMP) closed down -0.44%.

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Energy and chemical stocks led to the declines in today's closing price of China's Shanghai Composite, which closed lower. As a result of a string of COVID-19 regulations that reduced gasoline demand, China Petroleum & Chemical Corp's stock fell more than 3%. Meanwhile, a top Communist Party official warned on Saturday of potential economic spillovers from global issues, claiming that the foundation for the Chinese economy's recovery "is not firm enough." However, according to government data released on Monday, China's industrial profit plummeted -22.9% in the first 2 months of 2023, showing that the manufacturing sector was still having difficulties even after the nation relaxed its COVID-19 rules.

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The Nikkei 225 Stock Index of Japan also closed higher at the same time as expectations for fiscal policy tightening decreased after a previous inflation reading revealed that the nation's inflation was slowing from around 40-year highs. The volatility of Nikkei 225 options is factored into the Nikkei Volatility, which decreased by 2.70% to 19.08.

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U.S. Stock Movers Before Market

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Once the lender announced that it had purchased the deposits, mortgages, and certain other assets of Silicon Valley Bank from the FDIC, First Citizens BancShares Inc (FCNCA) increased by around +12% in pre-market trading.

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Following the SVB transaction, First Republic Bank (FRC) jumped more than +24% in pre-market trading.

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Following the company's announcement that it had reached a merger deal with SoftBank Group and its affiliate, Berkshire Grey Inc. (BGRY) experienced a spike of nearly +17% in pre-market trading.

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The stock of Sanofi ADR (SNY) increased by roughly 1% in premarket trade after Barclays changed its rating from equal weight to overweight.

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Following a Trade Algo article claiming that huge pharma corporations were showing interest in acquiring BridgeBio Pharma Inc (BBIO), the stock increased by more than +7% in pre-market trading.

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In pre-market trading, Orange SA ADR (ORAN) increased by more than 2% after Morgan Stanley upgraded the stock from equal weight to overweight.