US stock futures edged higher amid tight Asian trade as authorities announced plans to contain the impact of the Silicon Valley Bank (SVB) collapse, while traders and investors bet on a rate hike this month.
The dollar fell as Goldman Sachs predicted that the US Federal Reserve will not raise interest rates again next week, stopping the biggest rise in short-term Treasuries.
Market fluctuations came after the Fed and the US Treasury announced a series of measures to stabilize the banking system and announced that SVB depositors will have access to their deposits on Monday.
Authorities took over the New York-based Signature Bank, marking the bank’s second bankruptcy in days.
Investors reacted by raising US S&P 500 futures by 1.6% and Nasdaq by 1.7%. EURO STOXX 50 futures edged up 0.3% and FTSE futures added 0.1%.
The broadest MSCI index of Asia-Pacific equities outside of Japan rose 1.4%, helped by gains in China.
Chinese blue chips climbed 0.8% after Beijing retained the central bank chief and finance minister on Sunday as economic troubles loomed at home and abroad.
The Japanese Nikkei fell 1.6% due to falling banking stocks, while the South Korean rose 0.2%.
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In the meantime, traders have speculated that the Fed will now be reluctant to raise interest rates by 50 basis points next week, and may not even raise them at all.
Fed fund futures rose to overvalue any possibility of a half-point increase, up from about 70% before the SVB news broke last week.
The possible peak of rates fell to 5.08% from 5.69% last Wednesday, and by the end of the year, the markets returned to lower rates.
Much will depend on what US consumer price data is released on Tuesday. High values could likely force the Fed to raise rates aggressively even in a tight financial system.
The European Central Bank meets on Thursday and is expected to raise its rates by 50 basis points.
In foreign exchange markets, the dollar lost 0.9% against the Japanese yen to 133.78 and 0.6% against the Swiss franc. The euro climbed 0.8% to $1.0735 amid falling short-term US yields.
Gold rose nearly 1% to $1,885 an ounce.
Oil prices fluctuated from fall to rise, with Brent gaining 20 cents to $82.98 a barrel and US crude adding 26 cents to $76.94 a barrel.
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