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There’s no doubting it now – Credit Suisse has made the banking crisis global and, in classic financial crisis mode, investors are rushing for the global safe havens of the US dollar, US Treasuries and Japanese yen.

There are major economic data releases from Asia on Thursday – New Zealand GDP, Japanese trade, Australian unemployment, and an Indonesian rate decision – but all that will be subsumed by the ferocious volatility sweeping through world markets.

Indeed, the most important driver for Asian markets on Thursday may come from Frankfurt. The European Central Bank (ECB) was on track to raise rates by 50 basis points, but can it be so aggressive – can it tighten at all – in light of Wednesday’s tumultuous events?

A cynic might point out that the ECB has form for failing to grasp the enormity of an unfolding financial crisis and raising interest rates. Not once, but twice.

Asian markets are likely to open under severe pressure on Thursday, even though Wall Street closed off its lows – the Nasdaq even ended up slightly – after the Swiss National Bank said it would provide Credit Suisse (CSGN) liquidity “if necessary.”

Even if a full resolution for Credit Suisse is announced and markets surge in a relief rally on Thursday, financial crises are not resolved in a few days. Remember, Bear Stearns was rescued in March 2008, oil rose to a record high and the ECB raised rates that July, and Lehman wasn’t until September.

Debate is intensifying on the roots of the banking crisis – solvency, liquidity, or asset quality? – regulatory blind spots, the US and Swiss response so far, what more regulators need to do, and the impact on growth and monetary policy going forward.

But ultimately, the banking system and markets rely on confidence. If that goes – and it can disappear very quickly – it can take a long time to recover.

Amid so much uncertainty, investors won’t stray too far from the safety of the dollar, Treasuries and the yen, and the top-rated collateral of US bills. The aforementioned Asian economic indicators could offer brief distraction, but it will likely be just that – brief.

Here are three key developments that could provide more direction to markets on Thursday:

– ECB policy meeting

– Indonesia interest rate decision

– Japan trade (February)

(By Jamie McGeever; editing by Josie Kao)

LONDON, March 15 (Reuters) – Traders’ bets on a large European Central Bank interest-rate hike this week evaporated quickly on Wednesday as a rout in Credit Suisse shares fanned concern about the health of Europe’s banking sector.

The ECB has contacted banks on its watch to quiz them on their exposure to the struggling Swiss lender, two supervisory sources told Reuters.

Money market pricing suggested traders now saw less than a 20% chance of a 50-basis point rate hike at Thursday’s scheduled ECB meeting.

That’s down from as high as 90% at the start of the session IRPR, when a source-based story saying ECB policymakers were leaning towards a half-percentage-point rate hike was published.

Credit Suisse shares CSGN.S slid to a new record low, after its largest investor said it could not provide the Swiss bank with more financial assistance, extending days of turmoil in financial markets that followed the collapse of US-based Silicon Valley Bank.

Market pricing now suggested a smaller, more cautious 25 bps move, was now anticipated.

“The instability has raised questions if the ECB will go ahead and raise rates by 50 bps as originally planned tomorrow,” said Societe Generale analyst Kenneth Broux.

While rapidly rising interest rates across major economies have raised concern about potential pressure points, many analysts still expected a large ECB hike given high inflation.

“The risk that they do 25 bps (or nothing) is not zero, but it is low, as it would send a terrible signal to the market,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

“Rather, the ECB might communicate on the support measures and backstop facilities they could put in place in order to make sure that banks have sufficient access to liquidity at any time.”

As unease spread, the euro slid 1.8% against the dollar, its biggest one-day drop since the height of the COVID-induced market turmoil of March 2020.

Markets now priced euro zone rates would peak at around 3% this year, down from 4% last week.

Germany’s two-year government bond yield, sensitive to interest rate expectations, plunged 52 basis points at 2.42%, and the gap between Italian and German government bond yields moved back towards 200 bps.

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Analysts also said that banking fears spreading to Europe through Credit Suisse could prompt the ECB to announce a new liquidity backstop.

Were the ECB to announce a facility, Danske Bank chief analyst Piet Christiansen, said it could be a one-year liquidity operation acting as a backstop at the average deposit rate, compared to current weekly and three-month operations at the more punitive main refinancing operations rate.

Pictet’s Ducrozet said the ECB could also ease collateral rules for banks, though not as much as the Federal Reserve. Eventually providing new, ad-hoc loans to banks may be more effective, he added.

“Between now and tomorrow a lot can change so Lagarde can make the reference that they (the ECB) have the tools available to use if they need to,” said Marchel Alexandrovich, European economist at Saltmarsh Economics.

(Reporting by Joice Alves and Alun John in London, and Yoruk Bahceli in Amsterdam, Writing by Dhara Ranasinghe; Editing by Toby Chopra and Jon Boyle)

March 15 (Reuters) – Gold prices climbed over 1% to their highest since early February on Wednesday as a fresh crisis in the banking sector turned investors away from seemingly riskier assets and drove them to the safety of bullion.

Spot gold jumped 1.2% to $1,924.63 per ounce by 11:56 a.m. EDT (1556 GMT). U.S. gold futures gained 1.1% to settle at $1,931.30.

Europe’s bank stocks came under pressure again, with Credit Suisse (CSGN) shares sliding after its largest investor said it could not provide the Swiss bank with more financial assistance.

“It’s a total safe-haven trade. There’s a lot of concern about Credit Suisse and now European banks are really coming under quite a bit of pressure. So it’s a complete flight to safety,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Gold prices in sterling hit a record high while bullion in euros also spiked towards all-time peaks hit last year.

“People are going to the U.S. Treasuries, gold, silver, and the dollar. They’re exiting riskier assets like U.S. equities and economically sensitive metals like copper, platinum and palladium,” Streible said.

Gold rose despite a sharp jump in the dollar. A strong greenback would usually weigh on demand for dollar-priced bullion.

Spot silver added 0.6% to $21.82 per ounce, while platinum fell 2.4% to $958.76, and palladium lost 3.1% to $1,459.79.

Overall focus was still on the Federal Reserve’s next move on interest rates as it assesses data showing elevated inflation in February against the backdrop of the collapse of two regional banks.

Markets put a 57.1% chance on the Fed holding its benchmark rate at current levels at its March 21-22 policy meeting.

Gold is traditionally considered a hedge against inflation, but higher rates increase the opportunity cost of holding the non-yielding asset.

Volatility is expected over the coming days ahead of the Fed meeting, said Craig Erlam, senior market analyst at OANDA.

(Reporting by Bharat Govind Gautam and Ashitha Shivaprasad in Bengaluru; Editing by Mark Potter and Emelia Sithole-Matarise)