Futures edge higher as SVB deal soothes bank fears

WASHINGTON: U.S. stock index futures edged higher on Monday after a buyout deal for failed Silicon Valley Bank's deposits and loans helped soothe some jitters around severe stress in the banking sector.

First Citizens BancShares Inc (FCNCA.O) said on Monday it will acquire parts of Silicon Valley Bank (SIVB.O), the collapse of which earlier this month marked the largest bank failure since the 2008 financial crisis, unleashing fears about a liquidity crunch in the sector.

At 5:02 a.m. ET, Dow e-minis were up 102 points, or 0.31%, S&P 500 e-minis were up 13.5 points, or 0.34%, and Nasdaq 100 e-minis were up 21.5 points, or 0.17%.

Shares of First Citizens advanced about 11% in light premarket trade, while First Republic Bank (FRC.N) jumped nearly 27% after a report said U.S. authorities are considering more support for banks, which could give the embattled regional lender more time to shore up its balance sheet.

Other regional banks Western Alliance Bancorp (WAL.N) and PacWest Bancorp (PACW.O) also climbed 5.4% and 9.2%, respectively.

Shares of major U.S. banks JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) advanced between 0.8% and 1.4%.

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.

While the Silicon Valley Bank deal has helped instill some confidence in the banking sector's stability, concerns about a bigger crisis have not abated completely, analysts said.

"Shunting parts of the failed bank off to a new owner may give the regulator more capacity to deal with problems still threatening to pop up elsewhere, particularly with U.S. regional banks," said Susannah Streeter, head of money and markets, Hargreaves Lansdown."The big worry is that they are sitting on big piles of unrealised losses, not just in their bond portfolios but on other assets that have been battered by the storm of high interest rates."

With the banking sector stress threatening to snowball into a bigger financial crisis and potentially causing a steep economic downturn, traders have largely priced in a pause in the Federal Reserve's rate hikes in May.

U.S. Treasury yields edged higher on Monday as some fears about the banking sector eased.

Despite the turbulence in financial markets, all three major Wall Street indexes logged gains last week, with the benchmark S&P 500 (.SPX) and the Nasdaq (.IXIC) 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.