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Wall Street falls as regulators announce backstop of Silicon Valley Bank depositors

World stock markets and Wall Street futures tumbled Friday ahead of a US employment market report as investors worried about more interest rate rises.

London, Shanghai, Frankfurt, and Tokyo markets all fell. Crude oil prices had dropped.

Wall Street’s benchmark S&P 500 index tumbled by the most this year on Thursday as Federal Reserve Chair Jerome Powell cautioned that interest rates may be hiked sooner than anticipated to calm persistently rising inflation.

Traders are looking forward to the release of US government hiring figures on Friday after other measures revealed that the employment market has remained solid despite several interest rate rises. This is beneficial for employees, but Fed policymakers are concerned that growing wages would drive inflation.

This might result in further rate rises, dampening economic activity and employment.

Fed policymakers are “clearly communicating that rates will rise,” according to High Frequency Economics’ Rubeela Farooqi.
The FTSE 100 in London sank 1.5 percent to 7,760.88 in early trade, while the DAX in Frankfurt fell 1.9 percent to 15,329.28. The Paris CAC 40 lost 1.9 percent to 7,177.35.

Futures for the S&P 500 and the Dow Jones Industrial Average were down 0.7 percent on Wall Street.

The S&P 500 lost 1.45 percent on Thursday, significantly diminishing this year’s gains. 95 percent of the businesses on the benchmark index fell.

The Dow fell 1.07 percent, while the Nasdaq fell 1.76 percent.

SVB Financial Group lost 60% of its value after declaring intentions to raise up to USD 1.75 billion to bolster its financial position in the face of rising interest rates and economic worries. Bank of America, Citigroup, and other large banks all dropped precipitously.

In Asia, the Shanghai Composite Index fell 1.4 percent to 3,230.07, while Tokyo’s Nikkei 225 fell 1.7 percent to 28,143.97. Hong Kong’s Hang Seng Index fell 3% to 19,319.92.

Seoul’s Kospi was down 1% to 2,394.59, while Sydney’s S&P/ASX 200 fell 2.3 percent to 7,144.70.

The Sensex in India fell 1.2 percent to 59,085.70. Markets in New Zealand and Southeast Asia fell.

Powell said earlier this week that the Fed was prepared to inflict further large rate rises if necessary.

This fueled suspicions that the Fed and other central banks would force the world economy into at least a temporary recession in order to extinguish inflation.

According to a federal survey released on Thursday, the number of individuals asking for unemployment benefits increased by the most in five months last week, while layoffs remained low.

Yields on the two-year Treasury note, which tend to mirror expectations for future Fed action, fell to 4.87 percent from about 5.05 percent immediately before the announcement of the jobless data. It had been at its highest point in 16 years.

According to a survey released on Wednesday, the number of job postings posted throughout the nation last month was greater than economists predicted.

Traders anticipate that the Fed will increase its key lending rate by an unusually wide margin of 0.5 percentage points at its March 22 meeting.

According to CME Group, this is up from 0.25 points before Powell’s statements this week.

In the United States, inflation rose to 5.4 percent in January, significantly beyond the Fed’s objective of 2 percent.

The central bank has already boosted its benchmark interest rate to a range of 4.50 percent to 4.75 percent, up from near zero at the start of 2022, marking the quickest sequence of increases in decades.

Businesses are wary about their prospects in 2023.
Profits are expected to dip in the first half, according to economists.

On the New York Mercantile Exchange, benchmark US crude fell 80 cents to $74.99 a barrel in electronic trading.

The previous session saw the contract fall 94 cents to USD 75.72. Brent crude, the international oil trade benchmark, fell 64 cents to USD 80.95 per barrel in London. The previous session had a drop of USD 1.07 to USD 81.59.

The dollar rose to 136.39 yen from 136.17 yen on Thursday. The euro increased to $1.05 from $1.05 before.

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