A look at the day ahead in U.S. and global markets from Mike Dolan
After a week of sweeping interest rate rises into a simmering bank crisis, market anxiety about the state of the financial system persists as the end of the first quarter comes into view.
Just how much economic damage the banking fright on both sides of Atlantic will wreak is now a critical question for policymakers, who despite the latest round of rate hikes are now expected to be at or near the end of their tightening cycles.
On that score, the first early March business surveys from Europe showed little sign of disturbance yet - if anything they show economies picking up steam again just as the bank shock hit. And the brisk start to the year for major economies was also underlined by punchy British retail numbers.
That confuses the policy picture even more as it comes against continued jitters about recent bank failures, whether there's more stress to come, pervasive depositor uncertainty and how regulators respond.
U.S. regional bank stocks lurched lower again on Thursday, with the KBW Regional Bank index sliding 3% as Treasury Secretary Janet Yellen tried to reassure that public deposits were safe, promising firepower to battle any crisis - a day after she unnerved markets by saying blanket insurance of all deposits was not being considered.
But the ongoing stress level was evident in the latest Federal Reserve data on emergency lending to banks that showed continued large scale extensions of credit and which now include official foreign borrowing.
The Fed reported discount window borrowing, its main source of emergency credit, ticked down to $110.2 billion as of Wednesday from the record $152.9 billion last week.
But banks boosted borrowing under the Fed's newly launched Bank Term Funding Program to $53.7 billion - almost 5 times its first outing the previous week. The Fed also reported lending to foreign central banks went from nothing on March 15 to $60 billion - suggesting rising need for dollar liquidity overseas.
European bank stocks fell 3% early on Friday, with Deutsche Bank shares down for a third day - losing 5% amid rising market costs for insuring against the risk of default.
European Central Bank President Christine Lagarde is due to attend Friday's European Union summit in Brussels and update leaders on the state of affairs in the financial system.
Standard Chartered Chief Executive Bill Winters said on Friday Credit Suisse's $17 billion Additional Tier 1 bonds wipeout last weekend had "profound" implications for global bank regulations a Fed move to guarantee non-insured deposits was a "moral hazard".
As part of the deal for UBS to take over Credit Suisse last weekend, the Swiss regulator determined that Credit Suisse's AT1 bonds would be written down to zero
On top the banking stress, geopolitics muscled in on the banks. The ECB is pressing Austria's Raiffeisen to unwind its highly profitable business in Russia.
Wider markets were lower in Asia and Europe and U.S. stock futures were in the red again ahead of the open.
With less than a 50% chance of another Fed rate rise in this cycle now priced into the futures, almost 80 basis points of rate cuts are now seen by year-end. Two-year Treasury yields skidded below 3.70% - a whopping 140bp below peaks hit a little over two weeks ago.
Torn between the rate cut speculation and potential safe-haven demand from any further blowup in banks, the dollar rose - with fresh European concerns dragging the euro back in particular.
Elsewhere, Block shares slid almost 15% on Thursday after Hindenburg Research disclosed its short positions in the company. Crypto exchange Coinbase Global lost 14% as the U.S. Securities and Exchange Commission's threatened to sue the company.
Key developments that may provide direction to U.S. markets later on Friday:
* March flash business surveys for the United States and around the world. U.S. Feb durable goods orders. Canada Jan retail sales
* St. Louis Federal Reserve President James Bullard speaks
* European Union Summit in Brussels, where European Central Bank President Christine Lagarde participates; Bank of England policymaker Catherine Mann speaks in Washington
(By Mike Dolan, editing by Christina Fincher email@example.com. Twitter: @MikeD)