WASHINGTON/SINGAPORE : U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank threatened to trigger a broader financial crisis.
"But, fairly or not, the episode will contribute to higher levels of background volatility, with investors watching warily for other cracks to emerge as the Fed's policy tightening continues." European stock markets fell 0.6 per cent in early trade, while banking stocks fell just over 1 per cent. U.S. stock futures were higher. Asian shares outside Japan climbed over 1 per cent while the blue-chip Nikkei tumbled 1 per cent.
Goldman Sachs analysts said they no longer expect the Fed to raise rates by 25 basis points at its next policy meeting on March 21-22, amid the stress in the banking sector. A senior U.S. Treasury official said the actions taken would protect depositors, while providing additional support to the broader banking system, but officials and regulators were continuing to monitor financial system stability.The risk would be borne by the Deposit Insurance Fund, which has sufficient funds to do so.
Together with the Fed's decision to ensure financial institutions can meet the needs of all their depositors, the steps would"restore market confidence," the official said.
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