U.S. futures shot higher early Monday, with bank stocks mostly gaining after the Federal Deposit Insurance Corp. said it had agreed to the sale of troubled Silicon Valley Bank to North Carolina-based First-Citizens Bank & Trust Co.
Futures for the Dow Jones Industrial Average and S&P 500 each climbed 0.8% early Monday.
The FDIC took control of Silicon Valley Bank after it collapsed on March 10, promising to protect all depositors. Nasdaq-traded stock of First Citizens BancShares, Inc., parent company of First-Citizens, jumped 40% in premarket trading early Monday.
The acquisition of Silicon Valley Bank lender could raise confidence in the troubled banking industry after failures at SVB and two other banks rattled investors, driving bank shares sharply lower.
But concerns persist that higher interest rates that are squeezing lenders could increase the likelihood of a recession. Earlier this month, shares of and faith in Credit Suisse, which has its own unique set of troubles, fell so much that regulators brokered a takeover of the Swiss bank by rival UBS.
Deutsche Bank, whose stock tumbled 8.5% in Germany on Friday on concerns over its financial health, gained 3.2% in early trading Monday.
“So far, regulators and lawmakers have worked together to keep the crisis under control, and they have used all the help they could to do so,” Naeem Aslam of Zaye Capital Markets said in a commentary. “This particular element is keeping the hope alive that whatever the issue was with Deutsche Bank, lawmakers are going to address it, as there is simply too much to lose if things are left alone.”
Germany’s DAX jumped 1.4% and the CAC 40 in Paris surged 1.2%. Britain’s FTSE 100 climbed 1%.
The managing director of the International Monetary Fund, Kristalina Georgieva, told a conference in Beijing on Sunday that risks to financial stability have risen as interest rates are raised to fight inflation. She said actions by central banks and other regulators have helped to ease strains on markets, “but uncertainty is high, which underscores the need for vigilance.”
Chinese markets declined after the government reported that industrial profits fell nearly 23% in the first two months of the year from a year earlier.
Hong Kong’s Hang Seng skidded 1.8% to 19,567.69 and the Shanghai Composite index lost 0.4% to 3,251.40.
Tokyo’s Nikkei 225 added 0.3% to 27,476.87 and the Kospi in Seoul shed 0.2% to 2,409.22. Australia’s S&P/ASX 200 edged 0.1% higher, to 6,962.00 and the Sensex in Mumbai gained 0.7%. Shares edged higher in Bangkok.
On Friday, the S&P 500 rose 0.6%, marking its second straight weekly gain, and the Dow industrials added 0.4%. The Nasdaq composite climbed 0.3% while the Russell 2000 index rose 0.9%.
Investors are focused on what the Federal Reserve and other central banks will do with interest rates going forward after the recent spate of turmoil in the banking sector.
The failures of Silicon Valley Bank and at New York-based Signature Bank have cast a harsh spotlight across the entire industry. Investors have zeroed in on smaller and midsized banks, the ones below in size of the “too-big-to-fail” banks and seen as riskier.
Pressure on lenders could hinder lending to small and midsized businesses across the country. That in turn could lead to less hiring, a weaker economy and a higher potential for a recession that many economists already saw as likely.
In other trading, U.S. benchmark crude oil advanced 85 cents to $70.11 per barrel in electronic trading on the New York Mercantile Exchange. It lost 70 cents to $69.26 on Friday.
Brent crude, the pricing basis for international trading, gained 92 cents to $75.51 per barrel in London.
The U.S. dollar rose to 131.48 Japanese yen from 130.57 yen. The euro inched up to $1.0778 from $1.0774.
Kurtenbach reported from Bangkok, Ott reported from Silver Spring, Maryland.