MNI US OPEN - Yields Plummet as Markets Rush to Price Post-SVB Slower Tightening

NEWS

FED/EQUITIES (MNI): Fed Unveils Funding Facility to Relieve SVB Strain

The Federal Reserve Sunday announced new funding for financial institutions to help assure banks have the ability to meet the needs of all their depositors as investors worry about contagion from the collapse of Silicon Valley Bank. "This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy," the Fed said in a statement. "The Federal Reserve is prepared to address any liquidity pressures that may arise."

EQUITIES (MNI): Ex-FDIC's Bair Sees Limited SVB Contagion Risk

The collapse of Silicon Valley Bank is unlikely to create major waves of contagion or significantly disrupt the financial system as long as regulators manage the situation adequately, former FDIC Chair Sheila Bair told MNI on Sunday. “It’s a USD200 billion bank in a USD23 trillion banking industry, so if handled with care, I don’t see it creating contagion,” she said in an interview.

EQUITIES (BBG): First Republic Sinks 60% as SVB Hangover Dents Smaller US Banks

First Republic slumps more than 60% in US premarket trading as measures taken by US authorities to calm investor concerns failed to provide relief to the regional lender’s shares. First Republic set to hit multi-year lows; trades down 66% at $28.09 as of 4:43am in New York. Another small bank, Western Alliance Bancorp, falls 24%

UK (MNI): SVB UK Arm Sold to HSBC, BOE Says

HSBC UK Bank have bought Silicon Valley Bank UK, the Bank of England said in a statement Monday, with the decision taken after consultation with relevant regulatory bodies and the government. The action has been taken "to stabilise SVBUK, ensuring the continuity of banking services, minimising disruption to the UK technology sector and supporting confidence in the financial system," the statement said.

JAPAN (MNI): Japan Monitors SVB Fallout Amid Focus on Small Banks

Japanese authorities are carefully monitoring the actions of U.S. regulators and movements in financial markets, but they view the collapse of Silicon Valley Bank as caused by unique circumstances relating to the lender's balance sheet, MNI understands.

CHINA/RUSSIA (MNI): Xi to Meet Putin In Moscow as Early as Next Week - RTRS

Reuters reporting that according to an unnamed source, Chinese President Xi Jinping could meet with his Russian counterpart Vladimir Putin in Moscow as soon as next week. In recent weeks there has been significant speculation in the Western press and among its politicians that China could be looking to supply weaponry to Russia for us in its war against Ukraine.

CHINA (MNI): China's 5% GDP Target Needs Policy Support - Li Qiang

Achieving the government's 5% GDP growth this year "will not be easy" as the external environment remains unpredictable and stabilising the economy is challenging, said China's new premier, Li Qiang, on Monday. The high base effect of China's economy meant reaching 5% would require policy combinations to expand demand, stabilise the macro environment, and prevent systemic risks, Li said at a press conference.

CHINA (MNI): China Needs Govt Property Fund, Rate Cuts - Senior Adviser

A senior advisor has called on policymakers to establish a state-backed fund of up to CNY100 billion to support the troubled property sector and provide better housing to people living in cities, while suggesting the central bank should cut rates to boost demand as inflation remains low.

CHINA (MNI): Yi Gang Reappointed as PBOC Governor

Yi Gang will remain the governor of the People’s Bank of China and Liu Kun will also continue to be finance minister, according to the 14th National People’s Congress on Sunday. Nominated by newly-pointed Premier Li Qiang, who was elected on Saturday, Yi, 65, and Liu, 66, will start their second five-year terms as the heads of two of China’s most important economic authorities.

FOREX: Greenback Slides as Banking Fallout Seen Crimping Fed Hiking Plans

• The US dollar is comfortably the poorest performer across G10, sliding against all others as markets pull back on implied rate hike pricing. For the Fed's March meeting, markets are now pricing in a solid chance of no change and a possible pause in the rate hike cycle. The USD Index is narrowing in on first key support at the 50-dma at 103.469 - a break below here opens levels not seen since mid-February.
• The moves follow the formal failure of both Silicon Valley Bank and Siganture Bank, with concerns that the Federal package announced by authorities over the weekend pushes to protect depositers, but falls short of any protection for equity or bond holders. Market focus turns to any further evidence of possible contagion across the global banking sector, as European banks slide sharply in one-way price action through the opening bell.
• Haven currencies are the notable outperformers, with JPY and CHF among the strongest in G10. USD/JPY has slipped to 133.56 while USD/CHF shows below 0.9150 for the first time since February 14th.
• The data and speaker slate is particularly light, with just an appearance from BoE's Dhingra on the docket. Both the ECB and Fed remain within their pre-meeting media blackout periods.

EGBS: Schatz Yields on Course for Record Drop

As ECB implied rates pull back on a US banking crisis-led flight to safety, 2Y German yields are currently on course for easily their biggest daily fall (going back to 1990), down 44bp on the day, more than 10bp greater than the previous record closes. 2-year OATs briefly touched 50bp lower on the day. Last seen at 2.71% and 46bp down from the last close.

ECB / BOE / FED pricing update:

• ECB: There is now around 42bp priced for this week's meeting (down from around 46bp on Friday's close and around 49bp on Thursday) as downside risks to the telegraphed 50bp hike this week continue. There are still 105bp of cumulative hikes priced by the October meeting, around 60bp below last week's peak.
• BOE: Markets now price around 15bp for next week's meeting (from around 26bp on Thursday) with a cumulative peak of 47bp of hikes priced by September (almost half the c. 90bp on Thursday).
• FED: Implied % Probability of a Fed pause next week rose above 30% in the past 15 minutes (70% prob of a 25bp hike). Prior to the SVB headlines hitting last Thursday, there was nearly 70% probability implied of a 50bp hike.

EQUITIES: E-Mini S&P Gains Considered Technically Corrective, Trend Remains Bearish

Eurostoxx 50 futures traded lower Friday. Price has moved below a key support at 4258.60 - the base of a bull channel drawn from the Oct 13 low. A continuation lower would threaten the uptrend that has been in place since late September last year. An initial downside objective would be 4169.30, the 50-day EMA. Key resistance has been defined at the 4328.00, the Mar 6 high and is the bull trigger. The short-term condition in S&P E-Minis remains bearish following last week’s sell-off. Today’s gains are considered corrective. Price last week cleared key short-term support at 3960.75, the Mar 2 low and this confirmed a resumption of the bear cycle that has been in place since the Feb 2 reversal. The move lower signals potential for an extension towards 3822.00, the Dec 22 low. Initial firm resistance is seen at 4045.27, the 50-day EMA.

• Japan's NIKKEI closed lower by 311.01 pts or -1.11% at 27832.96 and the TOPIX ended 30.59 pts lower or -1.51% at 2000.99.
• Elsewhere, in China the SHANGHAI closed higher by 38.619 pts or +1.2% at 3268.696 and the HANG SENG ended 376.05 pts higher or +1.95% at 19695.97.
• Across Europe, Germany's DAX trades lower by 144.16 pts or -0.93% at 15302.81, FTSE 100 lower by 66.22 pts or -0.85% at 7685.72, CAC 40 down 75.22 pts or -1.04% at 7152.94 and Euro Stoxx 50 down 45.83 pts or -1.08% at 4188.78.
• Dow Jones mini up 201 pts or +0.63% at 32115, S&P 500 mini up 41 pts or +1.06% at 3904, NASDAQ mini up 148.75 pts or +1.26% at 11991.75.

COMMODITIES: Gold Targets $1900.6 Retracement and Key Near-Term Resistance Level

A sharp sell-off in WTI futures last week has defined a key resistance at $80.94, Feb 7 high. A break of this hurdle is required to reinstate the recent bullish theme that would open $82.89, the Jan 23 high and a key resistance. The contract remains vulnerable and sights are on $73.80, the Feb 22 low. A breach of this level would strengthen a bearish threat. Initial resistance is seen at $78.06, the Mar 9 high. Gold reversed sharply higher last week and the yellow metal has traded higher today. Resistance at $1858.3, the Mar 6 high has been cleared. This signals scope for an extension towards $1900.6, a Fibonacci retracement point and a key near-term resistance. On the downside, initial firm support is seen at $1844.3, the 50-day EMA. A break of this level is required to instead signal a top - this would expose the bear trigger at $1804.9. Feb 28 low.

• WTI Crude down $0.17 or -0.22% at $76.54
• Natural Gas up $0.04 or +1.44% at $2.463
• Gold spot up $12.31 or +0.66% at $1880.6
• Copper up $2.2 or +0.55% at $404.9
• Silver up $0.22 or +1.07% at $20.7588
• Platinum up $0.61 or +0.06% at $964.62