Stock futures mixed ahead of ECB decision

Stock futures were mixed early Thursday morning as U.S. investors turned their attention to developments in Europe ahead of a key European Central Bank announcement following Wednesday’s turmoil in Credit Suisse and a late-night intervention from the Swiss National Bank.

Near 8:45 a.m. ET, Dow futures were off about 0.3%, S&P 500 futures were down 0.2%, while Nasdaq futures were flat.

The ECB is set to announce its latest policy decision at 9:15 a.m. ET with a press conference from ECB president Christine Lagarde following a half hour later.

Investors expect the ECB will raise interest rates by 0.25%, but this week’s turmoil in the banking system — which found its way to Europe’s shores in the form of Credit Suisse’s crisis on Wednesday — have challenged planned central bank actions to choke off inflation by raising interest rates.

“FOMC members likely have not yet decided what to do next week, given the volatility of markets,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note on Thursday. “But yesterday’s meltdown in Credit Suisse stock, and—more importantly—the loss of liquidity in the Treasury market, coming on top of the SVB, Silvergate, and Signature failures, makes it more likely that they pass on raising rates.

“It is more important, in our view, not to take risks with the stability of the system than to reassert your determination to fight inflation,” Shepherdson added.

A view shows a signage of Swiss bank Credit Suisse in front of an office building in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse

Late Wednesday, Credit Suisse announced it would borrow up to 50 billion Swiss francs, or about $54 billion, from the SNB.

Shares of Credit Suisse fell as much as 30% on Wednesday after its largest investor, the Saudi National Bank, said it would not increase its stake in the trouble bank, citing regulatory challenges to taking its stake north of 10%.

Credit Suisse shares trading in New York were up about 5% in pre-market trade on Thursday.

In U.S. economic data, the latest weekly report on initial jobless claims showed a drop in first-time filings for unemployment insurance to 192,000 down from 212,000 the prior week and suggesting continued strength in the U.S. labor market.

This report serves as one of the last pieces of notable economic data ahead of the Federal Reserve’s two-day policy meeting, which kicks off next Tuesday and will see the central bank announce its latest policy decision Wednesday afternoon.

Markets are now putting roughly 75% odds on the Fed raising rates by 0.25% at its policy meeting next week, down from expectations for a 50 basis point rate hike before this past week’s banking system turmoil.

Investors will also be paying close attention to testimony from Treasury Secretary Janet Yellen, who will speak before the Senate beginning at 10:00 a.m. ET. In prepared remarks released ahead of Yellen’s appearance, the Treasury Secretary said the U.S. banking system remains “sound.”

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