GLOBAL MARKETS-Global equities fall, gold rallies as banking worries linger
Investor sentiment remained fragile on Friday despite massive rescue for the banking sector, leaving global equities under pressure and gold prices at their highest since April and on track for bullion's largest one-week rally in four months.
Investor sentiment remained fragile on Friday despite massive rescue for the banking sector, leaving global equities under pressure and gold prices at their highest since April and on track for bullion's largest one-week rally in four months. U.S. Treasury yields extended their slide, and oil prices dove to 15-month lows.
Data showed March U.S. consumer sentiment fell for the first time in four months. In a crisis that began with the collapse of U.S.-based Silicon Valley Bank last Friday, investors lost confidence in U.S. regional banks and Credit Suisse in Europe.
Risk appetite waned on Friday after showing signs of recovery on Thursday. Credit Suisse's chief executive said on Friday the bank was working hard to stem customer outflows, although this could take time. Credit Suisse shares resumed their decline. Analysts say the worry about a possible banking crisis is far from over despite a group of major banks injecting $30 billion in deposits into First Republic Bank, a mid-sized U.S. lender, on Thursday.
The MSCI world equity index, which tracks shares in 49 nations, was down 0.55%. by 2:18 p.m. EDT (1818 GMT). European shares erased early gains and had their steepest weekly drop in five months, with the pan-European STOXX 600 finishing down 1.3% lower. It was under pressure from bank, insurance and financial services stocks .
European Central Bank (ECB) supervisors do not expect contagion for euro zone banks from the market turmoil, a source familiar with the content of an ad hoc supervisory board meeting this week told Reuters. The Dow Jones Industrial Average fell 402.21 points, or 1.25%, to 31,844.49, the S&P 500 lost 43.77 points, or 1.11%, to 3,916.51 and the Nasdaq Composite lost 86.94 points, or 0.74%, to 11,630.23.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 3.8708% compared with a previous close of 4.13%. The yield on benchmark 10-year Treasury notes fell 3.4043% from 3.583% previously.
Germany's 10-year government bond yield dropped to 2.069%, its lowest since the start of February, late in the session. The ECB raised rates 50 basis points on Thursday, sticking to its pledge to fight inflation even as some investors called for a pause in the rate-hiking cycle until the banking turmoil eases.
Markets are pricing in a 25 bps increase by the U.S. Federal Reserve when it meets next week, down from previous expectations for a 50 bps increase. Fed data on Thursday showed banks sought record amounts of emergency liquidity in recent days, which helped undo months of central bank effort to shrink the size of its balance sheet.
"The fact that the Fed has been very proactive in terms of opening the liquidity tap is potentially useful and that's stabilised things in the short term at least," said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors. "It's potentially a more stable environment, because it feels like we've passed the crisis point and things should normalise a bit."
The University of Michigan's preliminary March reading on the overall index of consumer sentiment came in at 63.4, down from 67 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 67.0. But households expected inflation to subside over the next 12 months and beyond. "As the economy slows and inflation remains a headwind, consumers are showing signs of retreating under the pressure. Inflation expectations are falling, giving the Fed some flexibility in the future path of rate hikes," said Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, North Carolina.
Manufacturing continued to struggle under the weight of higher borrowing costs. The euro was up 0.6% at $1.0671, having gained 0.9% in a month.
The dollar index, which tracks the greenback against a basket of six currencies, lost 0.59 points, or 0.57%, to 103.83. The yen was last down 1.34% at 131.93 per dollar. Spot gold prices rose 3.01% to $1,976.83 an ounce and U.S. gold futures GCv1 gained 2.6% to settle at $1,973.50. Bitcoin also rallied on safe-haven buying, hitting a nine-month high.
The risk-off sentiment also hit oil prices, with benchmark U.S. crude futures down 2.15% at $66.88 a barrel and brent crude sliding 2.16% to $73.09
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)