Silicon Valley Bank Collapse: What you Need to Know
The collapse of Silicon Valley Bank (SVB) on March 10 has sent shockwaves through global bank stocks, prompting assurances from President Joe Biden and other policymakers to calm market worries about contagion and prompting a rethink on the interest rate outlook.
President Biden on Monday addressed the banking crisis, hinting at new regulation of banks, but he faces a divided Congress unlikely to approve tougher new rules. State regulators closed Signature Bank (NASDAQ:SBNY) on Sunday, the third-largest failure in U.S. banking history, and HSBC bought the UK arm of SVB for a symbolic one pound.
The dollar has weakened as markets bet the Fed will slow its raising of interest rates to curb inflation. Canada's banking regulator is increasing its monitoring of domestic banks' financial health following SVB's collapse.
MACROECONOMIC DATA ANALYSIS
Due to the unexpected failure of lender Silicon Valley Bank, traders no longer anticipate a rate increase of 50 basis points by the U.S. Federal Reserve next week. The current forecast calls for a 25 bps change, though some predict no change at all or even a reduction. This is a swift reversal in expectations after traders had seen a 70% chance of a 50 bps rate hike just a week earlier as a result of Jerome Powell's hawkish remarks about the Fed.
Japanese policymakers downplayed the risk of the Japanese economy being harmed by the failure of Silicon Valley Bank, despite fears of a contagion hitting financial stocks and sending domestic share prices tumbling. Economy Minister Shigeyuki Goto said at a regular news conference that the government was closely monitoring any potential impact on Japan's economy, but that the collapse of the US lender was unlikely to have a significant impact for the time being.
Tuesday saw a decline in Asian currencies as worries about a U.S. banking crisis dampened investor confidence. Markets were also under pressure due to a mild dollar recovery before important inflation data was scheduled to be released later in the day. The US dollar index, which compares the greenback to a basket of six major currencies, rose by 0.26% to 103.472.
Gold prices remained near a six-week high on Tuesday as investors sought traditional safe havens amid fears of a U.S. banking crisis, with attention now shifting to upcoming inflation data for more clues on monetary policy. Gold futures fell by 0.19% to $1,913 per ounce.
Oil prices fell more than two dollars on Tuesday, extending the previous day's decline, as the failure of Silicon Valley Bank shook equities markets and fueled fears of a new financial crisis. Brent crude futures fell by 0.95% to $80.00 a barrel, while the West Texas Intermediate dropped by 1.04% to $74.02 a barrel.
USA: S&P500 -0.15%, Dow Jones Industrial Average -0.28%, Nasdaq Composite +0.79%
Europe: FTSE 100 -2.58%, DAX -3.04%, CAC 40 -2.90%
Asia: Nikkei 225 -2.19%, Hang Seng -2.17%, CSI 300 -0.32%, Nifty 50 -0.63%
Moderna president Stephen Hoge said in an interview on Monday that the company expects to price its COVID-19 vaccine in the United States at around $130 per dose in the future as government purchases shift to the private sector.
Hoge stated this in advance of a Congressional hearing on Moderna's pricing strategies chaired by Democratic U.S. Senator Bernie Sanders. "There are different customers negotiating different prices right now, which is why it's a little bit complicated," he added.
Market confidence increased on Monday as a result of government efforts to prevent a global banking crisis. Investors welcomed the historic Swiss-backed purchase of troubled Credit Suisse by UBS Group as well as the emergency dollar liquidity provided by leading central banks.
UBS will pay 3 billion Swiss francs ($3.23 billion) for the 167-year-old Credit Suisse Group AG and take on up to $5.4 billion in losses as part of a deal arranged by Swiss regulators on Sunday.