European stock futures higher; IFO, banking sector in focus

By Peter Nurse 

Investing.com - European stock markets are expected to open higher Monday, rebounding after the sharp selloff at the end of last week with the region’s banking sector remaining under scrutiny.

At 02:00 ET (06:00 GMT), the DAX futures contract in Germany traded 0.4% higher, CAC 40 futures in France climbed 0.3% and the FTSE 100 futures contract in the U.K. rose 0.4%. 

European equities closed firmly lower on Friday, with the DAX ending down 1.7%, after shares of Deutsche Bank (ETR:DBKGn) slumped as the cost of protecting against a default on its bonds soared on fears that the German banking giant will be caught up in the ongoing banking crisis.

There will be some relief Monday following the news that First Citizens BancShares (NASDAQ:FCNCA) has agreed to acquire Silicon Valley Bank’s deposits and loans, while European Central Bank President Christine Lagarde told European Union leaders on Friday that the euro-area banking sector remains healthy, holding up because of the strong regulatory regime.

That said, the smaller regional banks in the U.S. remain under stress, as deposits at small banks fell by $120 billion in the week to March 15, while borrowing jumped $253 billion, most of that presumably from the Federal Reserve.

Federal Reserve Bank of Minneapolis President Neel Kashkari said over the weekend that the recent bank turmoil has increased the risk of a U.S. recession, which would have global repercussions. 

Elsewhere, Russian President Vladimir Putin said on Saturday that he will station tactical nuclear weapons in Belarus, sending a warning to NATO over its military support for Ukraine and escalating a standoff with the West.

NATO spokeswoman Oana Lungescu called Putin’s comments "dangerous and irresponsible."

Bundesbank chief Joachim Nagel is due to speak later Monday ahead of Lagarde on Tuesday, while investors will also be keeping an eye on the release of the German IFO survey for March later in today’s session for clues of confidence levels in German businesses.

Oil stabilized Monday, hovering just above a 15-month low as traders look for fresh cues from the ongoing banking crisis, given the importance the banking sector plays in the global oil trade.

By 02:00 ET, U.S. crude futures traded 0.7% higher at $69.75 a barrel, while the Brent contract climbed 0.6% to $75.07. 

Both crude benchmarks gained around 3% last week, recovering after a near 13% slump the previous week, their biggest weekly declines in months, on fears the banking mess, coupled with aggressive Fed hikes, will lead to a U.S. recession .

Additionally, gold futures fell 0.6% to $1,989.75/oz, while EUR/USD traded 0.1% higher at 1.0766.