Gold sparkles in stormy week for markets

March 17 (Reuters) – Gold prices surged more than 2% on Friday as a wave of banking crises shook global markets and put bullion on track for its biggest weekly rise in three years, while bets solidified for a less aggressive Federal Reserve in its fight against inflation.

Spot gold climbed 2.8% to USD 1,971.95 per ounce by 1:47 p.m. ET (1747 GMT), highest since April 2022. Bullion has added about 5.6% this week, the most since March 2020.

US gold futures gained 2.6% to settle at USD 1,973.50.

“Gold is surging on fears that more bad banking news could appear over the weekend and hopes that the Fed will pause its rate hikes next week,” said Tai Wong, an independent metals trader based in New York.

The collapse of Silicon Valley Bank in the US has highlighted banks’ vulnerabilities to sharply higher rates, while a rout in Credit Suisse CSGN.S shares has added to the market turmoil.

“Gold is likely to shine through the chaos as investors adopt a guarded stance,” said Lukman Otunuga, senior research analyst at FXTM.

The dollar and stock markets slid, making bullion a more attractive investment. While it is considered a hedge against economic uncertainties, gold’s opportunity cost rises when interest rates are increased.

The Fed will raise interest rates by 25 basis points on March 22 despite the recent banking sector turmoil, according to a majority of economists polled by Reuters.

Silver was set for the biggest weekly percentage rise among the four precious metals. It advanced 3.1% to USD 22.38 per ounce on Friday.

Platinum firmed 0.1% to USD 974.21, while palladium dropped 2% to USD 1,401.63.

“The sudden tightening in financial conditions won’t help palladium, whose usage is largely industrial though it is technically in the precious complex,” Wong said, adding that platinum “has just been a chronic underperformer and is struggling to shake its reputation”.

(Reporting by Bharat Govind Gautam and Seher Dareen in Bengaluru; Editing by Matthew Lewis and Shounak Dasgupta)

Japanese shares end higher as worries over banking crisis ease

SINGAPORE, March 17 (Reuters) – Japan’s Nikkei share average ended higher on Friday, led by banking and electronics stocks, as easing worries over crisis at US private lender Silicon Valley Bank SIVB.O and Swiss bank Credit Suisse Group CSGN.S propped sentiment.

The Nikkei closed 1.2% higher at 27,333.79, while the broader Topix ended up 1.15% at 1,959.42.

The Nikkei index, however, ended lower for the week, amid a brewing banking crisis that sent bond yields plunging, while market participants sharply lowered expectations of future interest rate hikes in Western economies.

The stronger closings for the day follow a risk rally in the broader Asian markets and Wall Street overnight, which are set to spill over to European equities.

“The rescue package from U.S banks reassured the public’s confidence in the banking system, causing a relief rally,” CMC Markets analyst Tina Teng said.

“The recent event suggests that central banks are most likely to temper their rate hikes, which could be a fundamental change to stock markets.”

Investors are now on awaiting any developments as policy tightening by central banks could persist. The European Central Bank on Thursday raised rates by half a percentage point.

The Japanese yen pulled back from its one-month high to 133.78 per dollar.

Electronics giant Sony Group Corp. and financial institution Mizuho Financial Group Inc 8411.T, up 3.52% and 1.96%, respectively, were among the top gainers on the Nikkei.

Construction firm Taisei Corp., down 8.13%, was the biggest decliner, followed by Nippon Sheet Glass Co Ltd. that fell 2.41%.

Of the 225 Nikkei constituents, 147 rose, 74 fell and four remained unchanged.

The biggest percentage gainers in the Topix were entertainment company Sanrio Co Ltd. and education firm Business Breakthrough Inc., rising 16.73% and 19.46%, respectively.

Social shopping firm Enigmo Inc. and pub chain operator Hub Co Ltd. were the biggest decliners, down 12.58% and 9.39%, respectively.

(Reporting by Yantoultra Ngui; Additional reporting by Ankur Banerjee)

Australian shares end higher as banking crisis worries ease

March 17 (Reuters) – Australian shares closed higher on Friday, led by energy and banking stocks, as risk sentiment improved after authorities moved to rescue distressed banks, easing fears of a banking crisis in major markets.

The S&P/ASX 200 index finished 0.4% higher at 6,994.8, but posted a weekly decline of 2.1%, falling for a sixth straight week.

Contagion fears battered global markets this week after the collapse of US tech-focused lender Silicon Valley Bank, followed by worries that the banking crisis had spread to Europe with Credit Suisse under pressure.

However, a USD 54 billion lifeline from the Swiss National Bank to Credit Suisse and reports that several large banks injected billions of dollars in embattled First Republic Bank, boosted risk appetite.

“The market has obviously bounced off the lows but it’s been a very lifeless rebound as investors want to make sure that they have seen the last of those shockwaves that hit the US banking markets and then hit Europe,” said Tony Sycamore, an analyst at IG Group.

“The market is still skittish, and there’s been an easing of worries certainly over the past 24 hours, but the market wants to see more evidence of that,” Sycamore added.

In Sydney, financials rose 0.9%, with the “Big Four” banks up between 0.2% and 1.7%.

Australian energy stocks led gains on the benchmark, with a 2.3% jump after oil prices rebounded on reports that top producers Saudi Arabia and Russia met to discuss ways to enhance market stability.

Woodside Petroleum climbed 2.5% and Santos gained 2.3%.

Among individual stocks, Australian transit operator Kelsian Group fell more than 11% after the company undertook a discounted placement to fund its USD 325 million acquisition of a US-based bus operator.

Across the Tasman sea, New Zealand’s benchmark S&P/NZX 50 index gained 0.2% to 11,725.62.

(Reporting by Riya Sharma in Bengaluru; editing by Eileen Soreng)

Relief rally on bank rescue lifts riskier currencies; dollar slips

SINGAPORE, March 17 (Reuters) – The US dollar slipped on Friday after authorities and banks moved to ease stress on the financial system, taking the heat off most major currencies that tumbled this week in the wake of bank turmoil.

Action to rescue First Republic Bank in the US on Thursday boosted risk appetite globally on Friday as fears of a global banking crisis eased, making way for surges in the Australian and New Zealand dollars.

The antipodean currencies are traditionally shunned in times of risk aversion.

The Aussie jumped 0.76% to USD 0.6708 in Asia trade on Friday, while the kiwi rose 0.69% to USD 0.6239.

With oversight by authorities, large US banks injected USD 30 billion in deposits into First Republic, which was caught up in a widening crisis triggered by the collapse of two other mid-size US banks over the past week.

The move followed Credit Suisse’s announcement earlier on Thursday that it would borrow up to USD 54 billion from the Swiss National Bank, after the central bank threw a financial lifeline to the embattled Swiss lender.

Credit Suisse had similarly become embroiled in widespread contagion following the implosion of US-based Silicon Valley Bank (SVB), which resulted in a 30% plunge in its shares earlier in the week.

But even as the market rout stoked fears about the health of Europe’s banks, the European Central Bank (ECB) went ahead with a hefty 50-basis-point rate hike at its policy meeting on Thursday.

ECB policymakers sought to reassure investors that euro zone banks were resilient and that if anything, the move to higher rates should bolster their margins.

The euro’s reaction to the decision was fairly muted, though it gained more ground in Asia trade on Friday, rising 0.33% to USD 1.0647.

“The euro zone banking sector remains in reasonably solid shape,” said Wells Fargo international economist Nick Bennenbroek.

“Should market strains ease and volatility recede in the weeks and months ahead, persistent inflation should in our view be enough to elicit further (ECB) tightening.”

Elsewhere, sterling edged 0.4% higher to USD 1.2159, while the Swiss franc rose 0.35%. Earlier in the week, the Swissie had plunged the most against the dollar in a day since 2015.

The Japanese yen remained elevated, as traders still looked to safety assets, still fearing that recent stress unfolding across banks in the US and Europe could be just an early stage of a widespread systemic crisis.

It was last 0.56% higher at 133.01 per dollar, on track to rise more than 1% for the week.

Japan’s Ministry of Finance, Financial Services Agency and Bank of Japan officials will meet on Friday evening to discuss financial markets, the Nikkei newspaper reported, amid fears of the US banking crisis.

“The market gyrations of the past week are not rooted in a banking crisis, in our view, but rather are evidence of financial cracks resulting from the fastest interest rate hike campaigns since the early 1980s,” said analysts at BlackRock Investment Institute.

“Markets have woken up to the damage caused by that approach – a recession foretold – and are starting to price it in.”

The Federal Reserve’s monetary policy meeting next week now moves to centre stage. Some investors are hoping that the Fed could slow down on its aggressive rate-hike campaign in a bid to ease the stress on the financial sector.

“The turmoil in the banking sector is complicating the outlook for Fed policy, but the impact may be more nuanced than the Fed simply reversing course,” said Philip Marey, senior US strategist at Rabobank.

The U.S. dollar index fell 0.31% to 104.07.

(Reporting by Rae Wee; Editing by Bradley Perrett and Christopher Cushing)

Rupee firms as Asian markets power ahead on US, Europe bank rescues

MUMBAI, March 17 (Reuters) – The Indian rupee strengthened against the US dollar on Friday, as risk assets got some relief following bank rescues in the US and Europe, with the local currency holding near a key resistance zone.

The rupee was trading around 82.46 per dollar at 11:15 a.m. IST, compared to its previous close of 82.73.

The currency strengthened past the key 82.50-level and we do expect some more dollar sales as risk appetite has improved, but the 82.40-82.50 zone tends to be an area of resistance, a trader said.

If the currency manages to strengthen past it in a sustainable manner, then further gains are likely, the trader added.

After a week of turmoil in the markets over bank failures in major economies, Asian shares and currencies rebounded on Friday, as the dollar index fell 0.3%.

US stocks set the tone overnight, with the S&P 500 index rallying nearly 2% on news that a large group of banks were infusing cash into First Republic Bank.

The recovery in shares of European lender Credit Suisse, after it received help from Switzerland’s central bank to shore up its liquidity, further helped revive risk appetite.

“Heading into the day, we expect the rupee to trade with an appreciation bias,” HDFC Bank economists wrote in a note.

Besides improved risk sentiment, low crude oil prices could support the currency, they added.

Oil prices have eased drastically as Brent crude futures fell over 8% this week to USD 75.43 per barrel.

Meanwhile, the European Central Bank on Thursday pushed ahead with a 50 basis point hike despite strains in the banking sector.

That, along with robust US labour data has given more confidence to markets that the Federal Reserve would increase rates by 25 bps meeting next week. Some economists earlier reckoned a pause from the Fed was possible.

(Reporting by Anushka Trivedi; Editing by Varun H K)

Oil prices settle down, post big weekly losses on bank fears

March 17 (Reuters) – Oil prices settled lower Friday, reversing early gains of more than USD 1 a barrel as banking sector fears caused both benchmarks to reach their biggest weekly declines in months.

Brent crude futures settled down by USD 1.73, or 2.3%, to USD 72.97 a barrel. US West Texas Intermediate crude fell USD 1.61, or 2.4%, at USD 66.74.

At their session low, both benchmarks were down more than USD 3. Brent fell nearly by 12% in the week, its biggest weekly fall since December. WTI futures fell 13% since Friday’s close, its biggest since last April.

“The underlying fundamentals aren’t as terrible as what is being priced in here, but there is concern the oil is not as safe a place as cash or gold,” said John Kilduff, Partner at Again Capital LLC in New York.

Oil prices tracked equity markets lower, dogged by the banking sector crisis and worries about possible recession.

All three indexes were sharply lower in afternoon trading, with financial stocks down the most among the major sectors of the S&P 500 following the collapse of Silicon Valley Bank (SVB) and Signature Bank and with trouble at Credit Suisse and First Republic Bank.

Prices had recovered some ground after support measures from the European Central Bank and US lenders but dropped again when SVB Financial Group (SIVB) said it had filed for reorganization.

Pressure stemmed from “the continued fragile state of the market”, said Ole Hansen, head of commodity strategy at Saxo Bank.

Analysts still expect constrained global supply to support oil prices in the foreseeable future.

OPEC+ members attributed this week’s price weakness to financial drivers rather than any supply and demand imbalance, adding that they expected the market to stabilize.

WTI’s fall this week to less than USD 70 a barrel for the first time since December 2021 could spur the US government to start refilling its Strategic Petroleum Reserve, boosting demand.

And analysts expect China’s demand recovery to add price support, with US crude exports to China in March heading towards their highest in nearly two and a half years.

Saudi Arabia and Russia in a meeting on Thursday affirmed their commitment to OPEC+’s decision last October to cut production targets by two million barrels per day until the end of 2023.

An OPEC+ monitoring panel is due to meet on Apr. 3.

(Reporting by Laura Sanicola in Washington and Rowena Edwards in London; Additional reporting by Florence Tan and Trixie Yapin Singapore; Editing by David Goodman and David Gregorio)

China data backtrack in USD 21 trillion bond market sparks relief and concern

SHANGHAI, March 17 (Reuters) – Two days of chaos in China’s USD 21 trillion bond market ended on Friday after Beijing allowed money brokers to resume providing data to third-party platforms, bringing relief for traders but also raising questions over the regulators’ stance on data.

The abrupt u-turn saw brokers’ real-time bond price data reappear on most financial information platforms on Friday, including Wind and Dealing Matrix, traders told Reuters.

Regulators had on Wednesday barred the brokers from providing data feeds, citing data security. Turnover in the interbank bond market tumbled 9% on Wednesday and another 16% on Thursday as traders had trouble accessing price information with many turning to QQ and WeChat messaging groups to trade.

“I felt like I was blind,” said one trader. “I had no idea whether the market was rising or falling.”

The episode and lack of explanation risks further undermining business confidence in China at a time when many companies are trying to understand and adapt to Beijing’s tightening oversight over areas from finance to technology, analysts said.

China has in recent years grown more concerned over data security and rolled out new laws and compliance requirements for firms. Earlier this month it announced it would form a new national data bureau but has yet to give further clarity on how it will work.

“Already in the past year, and in particular the past few months there’s been quite a bit of confusion about the compliance requirements in terms of data security, and more than a little bit of trepidation about what they might mean for business,” said Tom Nunlist, a data policy analyst at research firm Trivium China.

“Until we see a more detailed explanation of what happened here, this increases the sense of compliance unpredictability,” he said.

DRIVEN CRAZY

The China Banking and Insurance Regulatory Commission (CBIRC), which regulates money brokers, has not responded to requests for comment on the data feed ban or its reversal.

The u-turn came after China’s central bank and the CBIRC summoned money brokers and some banks on Thursday afternoon to discuss the policy impact, financial news magazine Caixin reported on Friday.

“Can you imagine how happy I am after experiencing such deep sorrow?” said a bond trader, adding that the feed cut had driven her crazy looking for alternative sources of price information.

The ban was lifted for most money brokers, including the joint ventures of NEX International Ltd, BGC Partners (BGCP), Central Tanshi and Compagnie Financiere Tradition (CFT).

Popular platform qeubee, owned by Ningbo Sumscope Information Technology Co and money broker Tullett Prebon SITICO (China) Ltd, which supplies bond price data to Sumscope, remained subject to the data feed block. It was not immediately clear why.

The policy reversal suggests the industry-wide ban on data feeds was ill-conceived, traders said, while one bond fund manager criticized how the ban created fresh problems in the market, but the government didn’t offer any solution.

Some traders and analysts drew a parallel to a previous policy reversal in 2016, when China suspended its newly introduced stock market circuit breaker after the mechanism sparked sharp falls in share prices.

(Reporting by Brenda Goh and Winni Zhou; Additional reporting by Jason Xue and Samuel Shen; Editing by Muralikumar Anantharaman, Edwina Gibbs, Tom Hogue and Simon Cameron-Moore)

Wall Street closes higher as First Republic helps lift banks

NEW YORK, March 16 (Reuters) – A strong rebound by financials helped Wall Street’s main indexes close firmly positive on Thursday, after some of the country’s largest lenders came to the rescue of embattled First Republic Bank.

The technology sector also contributed to the gains, helping to boost the Nasdaq Composite to its strongest performance since Feb. 2, 2022.

The latest twist in the US regional banks saga came on the heels of a 50-basis point rate hike by the European Central Bank, which earlier in the day had dampened investor sentiment already hurt by fears of a banking crisis.

Financial institutions, including JP Morgan Chase & Co JPM.N and Morgan Stanley (MS), confirmed earlier reports they would deposit up to USD 30 billion into First Republic Bank’s coffers to stabilize the lender.

“Banks are looking out for one another,” said Huntington Private Bank chief investment officer, John Augustine.

“We had two outliers go down and now they want to save what is considered a more mainstream bank.”

Shares of JP Morgan and Morgan Stanley were up 1.94% and 1.89% respectively, while the lifeline buoyed First Republic Bank (FRC), which gained 9.98%.

The positive sentiment spread to other regional lenders, with Alliance Bancorp (WAL) and PacWest Bancorp (PACW) advancing 14.09% and 0.7%, respectively, following a negative start.

The KBW regional banking index gained 3.26%, while the S&P 500 banking index advanced 2.16%, as both sub-indexes reversed losses.

Concerns about banks have rattled the stock market in recent days after the collapse of SVB Financial fueled contagion fears.

Meanwhile, US Treasury Secretary Janet Yellen said the US banking system remains sound and Americans can feel confident that their deposits will be there when needed.

US-listed shares of Credit Suisse (CS) advanced after the bank secured a credit line of up to USD 54 billion from the Swiss National Bank to shore up liquidity and investor confidence.

The Dow Jones Industrial Average rose 371.98 points, or 1.17%, to 32,246.55, the S&P 500 .SPX gained 68.35 points, or 1.76%, to 3,960.28 and the Nasdaq Composite added 283.23 points, or 2.48%, to 11,717.28.

Data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to continued labor market strength, which could persuade the Fed to keep raising rates further.

Weak retail sales figures, as well as data showing a downward trend in producer inflation, on Wednesday had bolstered bets of a small rate hike by the Federal Reserve at its meet concluding on March 22.

Money markets are still largely pricing in a 25-basis-point rate hike by the Fed at its March 22 policy announcement.

Facebook parent Meta Platforms (META) and Snapchat operator Snap Inc (SNAP) climbed 3.63% and 7.25%, after the US administration threatened to impose a ban on rival TikTok.

Advancing issues outnumbered declining ones on the NYSE by a 2.80-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.

The S&P 500 posted 4 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 38 new highs and 235 new lows.

(Reporting by David Carnevali)

Gold prices hold firm as banking worries persist

March 16 (Reuters) – Gold prices edged higher on Thursday, bouncing towards last session’s 1-1/2-month peak as concerns about the banking crisis continue after the European Central Bank hiked interest rates despite the ongoing financial stability risks.

Spot gold was up 0.1% at USD 1,919.31 per ounce by 01:53 p.m. EDT (1753 GMT), after jumping to its highest since early February at USD 1,937.28 on Wednesday.

US gold futures settled 0.4% lower to USD 1,923 per ounce.

Ignoring financial market chaos and calls by investors to dial back policy tightening at least until markets stabilise, the European Central Bank raised interest rates by 50 basis points on Thursday.

“The ECB did surprise the market with a 50-basis point (bp) hike, it is a little unsettling because the reason banks are in trouble is because of rates rising too fast,” said Jim Wycoff, senior analyst at Kitco Metals.

“We are seeing continued safe-haven demand for gold with elevated anxiety in the marketplace over this banking crisis.”

Investors’ focus will now shift to next week’s US Federal Reserve policy meeting, with markets largely expecting the US central bank to raise rates by 25 bps.

While bullion is considered a hedge against economic uncertainties, higher rates increase the opportunity cost of holding the non-yielding asset.

Helping bullion further were losses in broader financial markets as shares, bonds and dollar fell.

The near-term outlook for gold looks bullish, but if the Fed decides to rate hikes by 50 bps next week, then it will pressure bullion, said Daniel Pavilonis, senior market strategist at RJO Futures.

Meanwhile, the number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to continued labor market strength.

Spot silver slipped 0.7% to USD 21.62 per ounce, platinum gained 1.2% to USD 973.53 while palladium dipped 1.2% to USD 1,430.44.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Jane Merriman and Krishna Chandra Eluri)

Investors shun high-yield bonds on recession, banking risks

March 16 (Reuters) – Global investors have resumed their selling of high-yield corporate bonds after a brief respite in January, as fears over the health of smaller banks add to risk aversion driven by worries over rising interest rates, recession, and defaults.

Concerns have been heightened by the wild swings in market interest rates since the collapse of Silicon Valley Bank SIVB.O last week.

Fund managers advise shunning high-yield bonds, despite their attractive yields, because of the risk these bonds could be hit by ratings downgrades, defaults, and a squeeze in company earnings.

“Market concerns are elevated, given the uncertainty of a recession this year, the path of inflation, and most recently, the collapse of Silicon Valley Bank,” said Jim Smigiel, chief investment officer (CIO) at investment firm SEI.

“Given the volatility of the past few days and the still unfolding situation within financials, the turmoil in the banking sector could certainly increase outflows and further test the system.”

The demand for high-yield bonds has faltered since February due to a rise in US Treasury yields, as strong economic activity bolstered expectations that inflation would remain sticky, and the Federal Reserve would have to raise interest rates more to contain it.

Refinitiv Lipper data showed high-yield bond funds, after seeing an inflow of USD 7.63 billion in January, faced an outflow of USD 11.51 billion in February.

So far this month, high-yield bond exchange-traded funds (ETFs) have seen a total outflow of USD 506 million.

However, safer money market funds have attracted USD 28.76 billion, and government bond funds have seen an inflow of USD 15.52 billion since February.

The ICE BofA Global high-yield bond index has fallen over 3% since the start of February, making the yields attractive at 8.7%.

The yield spread between the BofA high-yield bond index, and the US 10-year Treasury bond has risen to more than 500 basis points for the first time since October.

Still, the spread is tighter than the 2,090 basis points during the 2008 financial crisis and about 1,000 basis points in 2020 when the coronavirus crisis hit.

“Investors should look to reduce exposure to the US high yield market at this time because we expect there will be a better entry level in the near future,” said David Norris, head of US Credit at TwentyFour Asset Management.

“Once we can be sure that the Fed has reached or is close to reaching the terminal rate, with the potential for a soft to softish landing, investors at that point could begin to increase exposure to high yield.”

“In the meantime, investors should stay invested but move up the credit spectrum to higher-rated bonds in more defensive sectors, keeping a lower duration profile.”

DEFAULT RISKS RISE

According to Fitch Ratings, the trailing 12-month US high-yield default rate stood at 1.6% in February, the highest since June 2020. The credit rating agency also says default rates are poised to rise toward the historical average of 3.6%.

Deutsche Bank predicts higher risks of defaults this year in European high-yield corporate debt as they are increasingly vulnerable to the slowing global economy.

“There’s a huge wall of debt that is going to be maturing in 2024 to 2026 that is going to be resetting at much higher interest rates than where it is fixed today,” said Christopher Zook, CIO of CAZ Investments.

“And so there’s a lot of concern that there’s going to be a very significant increase in borrowing costs for these companies that are going to have to refinance in 2024-2026.”

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru;Additional reporting by Davide Barbuscia in New York; Editing by Vidya Ranganathan and Mark Potter)

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Inflation Update: Weak demand softens shocks

Monthly Economic Update: Fed cuts incoming