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Morning Bid: Europe, US reverse bank jitter sell-off: Will Asia follow?

March 20 (Reuters) – A look at the day ahead in Asian markets from Stephen Culp.

The bitterness of the global market seems to be reducing on whether the infection is spreading in the banking sector or not.

In fact, if European and US markets on Monday are a prelude to Asian markets on Tuesday, investors can expect a rebound.

On Monday, the Hang Seng (.HSI) fell 2.7% to a three-month low and the Nikkei 225 (.N225) fell 1.4%, but the risk-on fog began to lift as the earth turned toward Europe.

European shares (.STOXX) shrugged off an early selloff up 1%, as bank shares gained, and all three US stock indexes ended higher, led by a 1.2% jump in the blue-chip Dow.

Safe-haven assets – gold and the dollar – were both down about 0.5% at the closing bell.

The S&P Banking Index (.SPXBK) ended the session up 0.6%, but even with Monday’s gains, the index has fallen 21.3% this month.

Last week’s banking bloodbath culminated with UBS’s buyout of Credit Suisse just as the looming financial crisis in the US gave First Republic Bank (FRC.N) a $30 billion lifeline.

And on Monday, the Federal Deposit Insurance Corporation entered into an agreement for a subsidiary of New York Community Bancorp to buy deposits and loans from the recently shuttered Signature Bank (SBNY.O).

All this seems to have calmed the apprehensions and brought stability in the market for now.

VIX and the World Bank Stock

As central banks around the world meet the financial sector’s need for liquidity with its ongoing efforts to contain inflation while avoiding a recession, with the Federal Reserve convening for its two-day monetary policy meeting on Tuesday .

Market expectations about the size of the Fed’s next rate hike to be announced on Wednesday — and indeed whether it will raise interest rates — are in constant flux.

At last look, financial markets pegged the Fed funds target rate increase by 25 basis points at 73.1% probability and no hike at 26.9%, according to CME’s FedWatch tool.

Reuters Graphics

European Central Bank President Christine Lagarde insisted on Monday that the ECB has the tools to combat financial market turbulence while fighting inflation, days after announcing a 50 basis point policy rate hike.

Here are some things to watch on Tuesday:

– Chinese President Xi Jinping and Russian President Vladimir Putin are set to engage in formal talks regarding Beijing’s proposals for a resolution to war

– South Korea released its February PPI report

Federal Reserve convenes its two-day monetary policy meeting

Reporting by Stephen Culp; Editing by Josie Cao

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias under the Trust Principles.


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