The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1023 GMT - The euro falls as markets remain very cautious about the health of the European banking sector after UBS said it will buy its struggling Swiss rival Credit Suisse, ING says. EUR/USD may weaken further into the Federal Reserve's meeting Wednesday when the central bank is likely raise interest rates by 25 basis points even though volatility in the U.S. and global financial sector make it a "very close call," ING analyst Francesco Pesole says in a note. "The Fed funds futures curve is pricing in only a 50% probability of a hike this week, raising the chances of a positive dollar reaction in our base-line scenario." EUR/USD drops 0.1% to 1.0677. (renae.dyer@wsj.com)

1002 GMT - The Bank of England could raise interest rates by 25 basis points on Thursday but any sterling gains may be limited as the central bank may deliver a cautious outlook, ING says. "While we expect a 25bp rate hike, it's closer to a 50/50 call, as it is for other central banks meeting in the current highly volatile environment," ING analyst Francesco Pesole says in a note. Market implied probability of a rate rise is currently 57% but a big sterling rally may be prevented by BOE policymakers strongly signalling a pause in rate rises, he says. (renae.dyer@wsj.com)

0959 GMT - The Japanese yen rises to a five-week high against the dollar and a two-month high against the euro as investors seek safe havens following a rescue deal in which UBS will take over troubled rival Credit Suisse. MUFG advises selling USD/JPY, targeting 129.00 with a stop loss at 138.50, citing credit-risk concerns as the deal included completely writing down CHF15.8 billion in Credit Suisse additional tier one debt. This "risks spreading contagion through the European/global banking system via the repricing of bail-in debt and equity at other banks" and risk aversion should lift the yen, says MUFG currency analyst Lee Hardman in a note. USD/JPY falls 0.4% to 131.177, having earlier hit 130.548, according to FactSet. (jessica.fleetham@wsj.com)

0959 GMT - Sterling rises against the euro as markets may consider the eurozone banking sector as more vulnerable than the U.K. but these gains could prove temporary, ING says. "Given GBP is generally more sensitive to risk sentiment than the euro, and the U.K. banking sector is coming under scrutiny this morning, we see risks of a EUR/GBP rebound back above 0.8800 today," ING analyst Francesco Pesole says in a note. EUR/GBP falls 0.1% to 0.8745, having earlier reached a three-month low of 0.8690, according to FactSet, as European bank stocks fall after UBS agreed a takeover of ailing bank Credit Suisse. (renae.dyer@wsj.com)

0945 GMT - The green premium on Germany's 1.30% October 2027 green Bobl has risen since its launch in August, but the room for further increase is limited due to its current level and upcoming supply pressure, says Francesco Maria Di Bella, fixed-income strategist at UniCredit Research. The premium on this green Bobl compared to the twin 1.30% October 2027 conventional Bobl is around 7 basis points, up from 1.25bps at the launch, he says in a note. UniCredit Research expects the green premium on this green Bobl to trade in a 5-10 basis point range. The German Finance Agency will auction EUR1.5 billion in the 2027 green Bobl on Tuesday. (emese.bartha@wsj.com)

0938 GMT - The recent banking sector turmoil has boosted tech stocks and this is supporting bitcoin, Swissquote Bank says as the cryptocurrency rises to a nine-and-a-half-month high. The sharp fall in interest-rate expectations resulting from banking failures added more than $500 billion in market value to Microsoft, Apple, Alphabet and Amazon last week, Swissquote analyst Ipek Ozkardeskaya says in a note. "And Bitcoin, which has a strong correlation with tech stocks, gained 45% since the March 10 dip--and more importantly, showed that it could act as a hedge to a global bank stress." Bitcoin rises 4.8% to a high of $28,554, according to CoinDesk, as European bank shares slide after UBS agreed a takeover of ailing bank Credit Suisse. (renae.dyer@wsj.com)

0935 GMT - U.K. house prices rose 0.8% on-month and 3% on-year in March, partly driven by price increases at the top of the ladder according to new Rightmove data, Citi says. As expected, properties are taking longer to sell in the slow-paced market and the average stock of available properties per agent remained broadly flat in February at 43 properties, Citi analyst Ami Galla says in a research note. "Overall, these trends are broadly in-line with the recent outlook comments from house builders, which outline sequential improvement in site absorption rates and broadly stable pricing, albeit with higher incentives," the U.S. bank says. Barratt Developments, Persimmon and Taylor Wimpey are down 1.5%, 1.3% and 1.4% respectively. (joseph.hoppe@wsj.com)

0923 GMT - U.K. house prices rose 0.8% in March, rebounding from February's weakness but below the 20-year average of 1% according to Rightmove data, Interactive Investor head of investment Victoria Scholar says in a comment. The data echoes recent figures from Halifax, suggesting incipient signs of recovery in the U.K. housing market, Scholar says. "With the U.K. managing so far to narrowly stave off a technical recession, mortgage rates normalizing, and other economic data points improving, housing market activity has started to pick up," she says. However, the Office for Budget Responsibility predicts house prices will fall 10% from 2022's high, suggesting the market isn't out of the woods yet, Scholar says. Barratt Developments, Persimmon and Taylor Wimpey are down 1.6%, 1.4% and 1.3%, respectively. (joseph.hoppe@wsj.com)

0913 GMT - Shares in UBS and Credit Suisse tumble 9% and 58% respectively following news that the former is to take over the latter in a $3.25 billion emergency rescue deal. The price represents a deep discount to Credit Suisse's closing price Friday and the deal involves UBS assuming some $5.4 billion of losses, reflecting the fact that Credit Suisse's problems had been building for a while, Interactive Investor says. Meanwhile, central banks suggested loans could be available if needed to help any other potentially struggling firms. While banks are better equipped to deal with shocks following the 2008 financial crisis, the scale of the response from central banks at the weekend acknowledges gaps in the system, Interactive Investor's head of markets, Richard Hunter, writes. (philip.waller@wsj.com)

0848 GMT - Malaysia's export growth in 2023 will continue to be driven by rising external demand for electronic products and commodities, especially petroleum and palm oil, MIDF Research says in a note. But the performance of commodity trade will be subject to price effects, as current prices are generally lower than last year's, it says. With China reopening, MIDF expects a rise in exports to the country to support Malaysia's trade in the coming months. MIDF maintains its forecasts for Malaysia's exports and imports to grow 9.2% and 9.5%, respectively, this year. It says that downside risks could come from weaker global demand, rising inflation, excessive policy tightening and geopolitical tensions. (yingxian.wong@wsj.com)

0847 GMT - U.K. banking stocks are caught up in the market confusion caused by Credit Suisse's AT1 bond write down, says Shore Capital in a note. "Share prices are likely to remain sentiment-driven and so volatile in the near-term, and we would therefore encourage long-term investors to take advantage of the excellent buying opportunity in the U.K. banking sector that this has created," analyst Gary Greenwood says, noting that U.K. banks are in a strong position to withstand the economic downturn with strong balance sheets. Shares in the sector extend last week's losses, with NatWest and Barclays both down around 6%, Standard Chartered falling 5.3%, HSBC down 3.5% and Lloyds 2.7%. (elena.vardon@wsj.com)

0839 GMT - Barring a deterioration of the situation in the banking sector, the U.S. Federal Reserve is expected to deliver another 25 basis point interest-rate rise, bringing the federal funds rate to 4.75%-5.00%, SEB's analysts write in a note. "The dots are expected to signal further rate hikes closer to 5.5%," they say, adding that this is expected to be accompanied by a soft verbal message from Chair Jerome Powell. That said, the bar for rate cuts is high as inflation remains high, and the Fed is expected to primarily rely on further liquidity support measures if necessary, SEB's analysts say. (emese.bartha@wsj.com)

(END) Dow Jones Newswires

March 20, 2023 06:23 ET (10:23 GMT)

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