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GLOBAL MARKETS-Global shares slip after hedge fund's default

Published 30/03/2021, 07:38 am
Updated 30/03/2021, 07:42 am
© Reuters.

(Adds close of U.S. markets)

* Nomura, Credit Suisse warn on losses after Archegos share sale

* Ten-year bond yields rise ahead of Biden infrastructure plan

* Oil prices turn positive as traffic resumes on Suez Canal

* Asset performance: http://tmsnrt.rs/2yaDPgn

* World FX rates: http://tmsnrt.rs/2egbfVh

By Herbert Lash

NEW YORK, March 29 (Reuters) - The dollar gained and a gauge of global equities halted a slide on Monday as investors discounted any long-term impact from a hedge fund's default that roiled banks after Nomura 8604.T and Credit Suisse CSGN.S warned of billions of dollars in losses.

Crude prices edged higher after a report that Russia would support stable oil output from the Organization of the Petroleum Exporting Countries and allies ahead of a meeting with the producer group later this week.

Nomura said it faced a potential $2 billion loss due to transactions with an unnamed U.S. client while Credit Suisse said a default on margin calls by a U.S.-based fund could be "highly significant and material" to first-quarter results. at the hedge fund, named by sources as Archegos Capital Management, triggered a fire sale of stocks on Friday.

Nomura shares in Japan closed down 16.3%, a record one-day drop, while Credit Suisse shares fell 13.8%.

Stocks on Wall Street rebounded a bit, with the S&P 500 recouping most earlier losses, as investors looked ahead to an economy set to boom as it reopens from the coronavirus pandemic, said Edward Moya, senior market analysts at OANDA in New York.

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"What we're starting to see is that Wall Street firmly believes this is not systemic, this is not the end of the bull market cycle and we're going to see the market primarily focus on the reopening trade," Moya said.

Investors bought so-called value shares that are likely to do well in the recovery, pushing up the healthcare, communications services and consumer staples sectors. Financials fell on the Archegos default and technology sectors slid as bond yields rose and investors sold growth-oriented shares.

MSCI's all-country world index fell 0.08% while Europe's broad FTSEurofirst 300 index .FTEU3 added 0.19% to close at 1,647.63.

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.3%, the S&P 500 .SPX lost 0.09% and the Nasdaq Composite .IXIC dropped 0.6%.

The Archegos default is likely confined but with portfolio rebalancing at quarter end, "weird stuff" can happen at funds that are over-leveraged, said Thomas Hayes, chairman and managing member at New York hedge fund Great Hill Capital LLC.

"It was a confluence of several events compounded by the recent sell-off and weakness in the tech sector, which most hedge funds are leveraged to," Hayes said.

Financial and bank shares fell on both sides of the Atlantic. The financial services index .SXFP in Europe lost 2% and the region's banks sector .SX7P fell 1.0%.

The U.S. KBW bank index .BKX fell 2.3% as JPMorgan Chase & Co (NYSE:JPM) JPM.N fell 1.6%, the second biggest weight on the S&P 500 after Microsoft Corp MSFT.O , which eased 0.6%. Wells Fargo (NYSE:WFC) & Co WFC.N , down 3.3%, was the fifth biggest weight on the S&P.

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In Europe, Germany's DAX .GDAXI index closed up 0.5% to an all-time high after data over the weekend showed annual profit at Chinese industrial firms surged in January and February, highlighting a rebound in China's manufacturing sector. French CAC 40 .FCHI also gained 0.5%, while London's FTSE .FTSE slid 0.1%.

The dollar gained in choppy trading, with the euro trading below $1.18 and commodity currencies falling, as the greenback drew some safe-haven bids on concerns about the potential fallout from the Archegos default.

The dollar index, a measure of the greenback's value against six other major currencies, hit as high as 92.964, its strongest level since November.

The index =USD rose 0.161%, with the euro EUR= down 0.25% to $1.1763. The Japanese yen JPY= weakened 0.14% versus the greenback to 109.80 per dollar.

Euro zone government bond yields rose as relief from the refloating of the container ship blocking the Suez Canal prompted some selling of safe-haven assets. But rising COVID-19 cases kept investors broadly cautious about Europe.

German yields rose on Friday and continued to climb on Monday. The 10-year bund yield rose 0.9 basis point to a six-day high of minus 0.31% DE10YT=RR .

Longer-dated Treasury yields rose on investor expectations that U.S. President Joe Biden's infrastructure initiative to be announced on Wednesday could mean faster economic growth and a dramatic increase in Treasury bond issuance.

The 10-year U.S. Treasury US10YT=RR note rose 5 basis points to 1.7099%.

Oil also rebounded after the Ever Given container ship that has blocked the Suez Canal for nearly a week was refloated and traffic in the waterway resumed.

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Brent crude futures LCOc1 rose 41 cents to settle at $64.98 a barrel, while U.S. crude futures CLc1 settled up 59 cents to $61.56 a barrel.

Gold slipped more than 1% to a more than two-week low as a firm dollar and rising U.S. Treasury yields dented the safe-haven metal's appeal. Gold also was pressured by bets for a swift U.S. economic recovery.

U.S. gold futures GCv1 settled down 1.2% at $1,712.20 per ounce.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global markets since the start of the year

https://tmsnrt.rs/2O2c2fh Value vs Growth

https://tmsnrt.rs/2PIWJbN

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