A tense calm grips the markets after the turbulence caused by SVB

By Dhara Ranasinghe

LONDON, March 15 (Reuters) – Efforts by regulators and financial executives to allay contagion fears sparked by the failure of Silicon Valley Bank (SVB) buoyed sentiment on Wednesday.

* However, in a week when global banking stocks plunged – the S&P 500 index of regional banks fell 18% – the environment remains fragile.

* The European Central Bank remains in favor of raising interest rates by half a percentage point on Thursday, despite turmoil in the banking sector, given high inflation, a source close to his bank told Reuters Board of Governors.

* A reminder that major central banks remain in bullish mode on rates boosted government bond yields, as attention turned to the budget to be presented later by UK Chancellor Jeremy Hunt.

* “A lot of ingredients are in place for confidence to be rebuilt, but only time will tell if it will last,” said ING’s Antoine Bouvet.

* European shares were down 0.9% but remained above three-month lows hit on Monday when panic gripped global markets following the collapse of SVB last week.

* Asian stocks rose following Tuesday’s rally on Wall Street after U.S. inflation data delivered no nasty surprises, bolstering hopes the Federal Reserve will opt for a lower rate hike when of its meeting next week. .

* The broader MSCI Asia-Pacific ex-Japan equity index gained 0.9%, after losing 1.7% on Tuesday. The Japanese Nikkei closed flat, while a measure of Japanese banks, which fell 8% this week, rose more than 3%.

* US stock futures were mostly negative, suggesting a shaky start for Wall Street.

* Short-term bond yields, which tend to track rate expectations, were mixed on the day.

* The yield on two-year German bonds fell 3 basis points to 2.89%, after briefly falling to 2.43% on Tuesday. The yield on its US Treasury counterparts rose 10 basis points to 4.33%, off Tuesday’s six-month low of 3.83%.

* In currency markets, the dollar index, which compares the greenback to a basket of six major currencies, was flat at 103.74 units, while the euro also traded at $1.0735.

* Crude prices rose 1.6%, rebounding from a three-month low hit the previous day, on OPEC’s brighter outlook for Chinese demand.

(Additional reporting by Ankur Banerjee in Singapore and Naomi Rovnick in London; Spanish editing by Carlos Serrano)