US stock index futures gained on Monday after a buyout deal for the deposits and loans of the failed Silicon Valley Bank helped soothe some jitters around stress in the banking sector.
First Citizens BancShares Inc said on Monday it will acquire parts of Silicon Valley Bank, which collapsed earlier this month in the largest bank failure since the 2008 financial crisis, unleashing fears about a liquidity crunch in the sector.
Shares of First Citizens jumped 25% in premarket trade, while First Republic Bank surged 31.5% after a report said US authorities were considering more support for banks, which could give the embattled regional lender more time to shore up its sheet balances.
Regional banks Western Alliance Bancorp and PacWest Bancorp also climbed 6.8% and 11.8%, respectively.
Shares of major US banks JPMorgan Chase & Co, Citigroup and Bank of America advanced between 2% and 2.5%.
European bank shares also rebounded from declines last week when a sharp jump in Deutsche Bank’s credit default swaps, a type of insurance for bondholders, had exacerbated worries about the health of banks in the region.
“SVB was a victim of growing too fast and unwisely investing too much of its deposit base in longer dated treasuries. The take over has provided some reassurance that beneath this huge mistake SVB was basically sound,” said Stuart Cole, head macro economist at Equiti Capital.
The absence of any new banking failures over the weekend has also helped sentiment, Cole added.
US Treasury yields edged higher on Monday as fears about the banking sector eased.
Traders have largely priced in a pause in the Federal Reserve’s rate hikes in May amid lingering worries about the banking sector stress potentially causing a steep economic downturn.
Despite the turbulence in financial markets, the benchmark S&P 500 and the tech-heavy Nasdaq on Friday recorded their biggest two-week gains since early February and are on course for a quarterly gain.
Investors are also awaiting a host of economic data this week, including a consumer confidence reading and an inflation report that could give more clues about the Fed’s monetary policy path.
Remarks by Fed Board Governor Philip Jefferson, a voting member of the Federal Open Market Committee (FOMC) this year, on monetary policy later in the day will also be on the radar.
At 6:48 am ET, Dow e-minis were up 191 points, or 0.59%, S&P 500 e-minis were up 23.75 points, or 0.59%, and Nasdaq 100 e-minis were up 42.25 points, or 0.33%.
Among other stocks, US-listed shares of AstraZeneca Plc gained nearly 2% premarket after the drugmaker’s Eplontersen drug showed positive results in a late-stage trial. (Reporting by Amruta Khandekar and Ankika Biswas; Editing by Dhanya Ann Thoppil and Vinay Dwive