Dow futures rise 20 pts; banking sector tensions remain

By Peter Nurse 

Investing.com — U.S. stocks are seen opening marginally higher Monday, helped by an emergency liquidity operation by a Fed-led group of central banks and more consolidation in the banking sector, but tensions remain ahead of this week’s Federal Reserve meeting.

At 07:00 ET (11:00 GMT), the contract was up 20 points or 0.1%, traded 4 points or 0.1% higher, and climbed 12 points or 0.1%.

The Swiss banking giant UBS (SIX:) announced on Sunday that it will buy rival Credit Suisse (SIX:) for around $3.3 billion, with the assistance of the Swiss authorities.

Concerns had been growing about Credit Suisse’s survival as it faced growing liquidity difficulties.

Additionally, the Federal Reserve, along with a series of other senior central banks, announced the provision of additional liquidity through the standing swap line arrangements, a move designed to ease the strain on the global banking system.

However, tensions still remain, particularly after the UBS takeover resulted in some $17B being lost by Credit Suisse’s junior bondholders.

A number of U.S. regional banks are also still under pressure to shore up their deposit bases in the wake of the collapse of Silicon Valley Bank earlier this month.

First Republic Bank (NYSE:) stock traded 15% lower premarket Monday even after a group of banks last week pledged to deposit $30B in the embattled lender.

Investors will be looking at the U.S. authorities to see if more action is taken this week to restore confidence in the banking sector.

The holds a policy-setting meeting this week and is expected to lift interest rates by 25 basis points, a smaller rise than had generally been expected earlier this month.

However, the policymakers had been keen to emphasize the need for additional interest rate hikes to combat ahead of this banking turmoil, so investors will be keen for any guidance as to the likelihood of any future increases.

Oil prices fell Monday to 15-month lows, continuing last week’s hefty selloff, on concerns the ongoing banking crisis would hurt global economic activity and thus crude demand this year.

Iraq’s Prime Minister Mohammed Shia’ Al Sudani and OPEC Secretary General Haitham al-Ghais met over the weekend and stressed the need for coordination among oil-exporting nations to ensure prices do not fluctuate in too extreme a manner, according to a statement.

A ministerial committee of OPEC and producer allies including Russia, known as OPEC+, is set to meet on April 3, with a full ministerial meeting planned for June 4. 

By 07:00 ET, futures traded 2% lower at $65.55 a barrel, after a 13% decline last week, its biggest weekly drop since last April. The contract dropped 2.2% to $71.35 after a near 12% loss last week, its biggest weekly fall since December.

Additionally, rose 0.4% to $1,987.90/oz, while traded 0.3% higher at 1.0699.