U.S. stock futures drop amid fresh surge in banking sector concerns

By Scott Kanowsky 

Investing.com — U.S. stock futures fell on Wednesday, with investors cautiously eyeing banks after a nascent recovery in the sector’s shares lost steam in Europe.

At 07:00 ET (11:00 GMT), the shed 537 points or 1.66%, traded 69 points or 1.76% lower, and slid by 199 points of 1.62%.

Several regional banks in the U.S., including KeyCorp (NYSE:) and PacWest Bancorp (NASDAQ:), edged lower in premarket trading.

Lenders had contributed to a recovery on Wall Street on Tuesday, while sentiment was also boosted by which read largely as expected for February. The data, coupled with the pressure on the banking sector, spurred bets that the will have limited room to hike interest rates.

The rally in the U.S. continued in Asian stocks earlier today, with technology-heavy bourses in Hong Kong and South Korea gaining in particular. Broader markets in the region also rose as fears of a U.S. banking crisis seemed to have eased after the government intervened to protect depositors, following the collapse of Silicon Valley Bank.

But the gains did not linger for long in Europe, where banking stocks slumped sharply. Concerns in the continent remain over the health of these lenders’ bond portfolios after the downfall of SVB last week.

The losses were led by embattled bank Credit Suisse Group AG (SIX:), which was also hit by an announcement that its biggest shareholder, Saudi National Bank, was pulling further capital injections. Shares shed more than a tenth of their value and touched a fresh record low.

The index, which has been in the spotlight as traders fretted over the potential of worldwide contagion from the collapse of Silicon Valley Bank last week, had dipped by nearly 8%.

On the data front, focus will turn to out of the U.S., with observers keen for clues about the spending habits of Americans amid a warmer than usual winter weather and a resilient jobs market.

Elsewhere, oil markets pared back early gains as traders gauged the outlook for demand and the banking sector turmoil. futures traded 1.75% lower at $70.08 a barrel, while the contract moved down by 1.73% to $76.11 per barrel.

Additionally, rose by 0.50% to $1,920.55/oz, while dipped by 1.26% to 1.0599.