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Dow Futures Slip Lower as Archegos Capital Margin Call Rattles Markets

The forced selling of shares linked to Archegos Capital has markets on the defensive Monday as traders brace for the fallout from last week's reported margin call failure.

The Monday Market Minute

  • Global stocks mixed as traders brace for more fallout from the troubled Archegos Capital hedge fund, which reportedly defaulted on margin calls last week, triggering billions in forced stock sales.
  • Credit Suisse and Nomura say an unnamed client's sales could cause 'significant and material' losses this quarter, while shares in media groups such as ViacomCBS and Discovery lead the action in pre-market trading. 
  • Benchmark 10-year Treasury note yields hold near 1.658% in overnight trading, while the dollar index hovers nearly early November highs at 92.827.
  • Oil prices steady as Ever Given refloated in the Suez Canal, raising hopes that the five-day blockage will come to an end, freeing billions in delayed and stranded trade.
  • CDC data shows 51.6 million Americans have now been fully vaccinated against the coronavirus, with more than 143.4million doses administered as of Sunday.
  • U.S. equity futures suggest a weaker open on Wall Street ahead of a holiday-shortened week that includes a series of labor market readings including the March payroll report at 8:30 am Eastern time on Good Friday.

U.S. equity futures traded lower Monday as investors braced for the uncertain fallout from a series of block trades last week linked to a struggling hedge fund that has rattled stock markets around the world.

Archegos Capital, a New York-based family office run by noted investor Bill Hwang, has been named in multiple media reports as the seller behind more than $20 billion in so-called block trades of U.S. and China-based media stocks such as ViacomCBS  (VIA) , Discovery Inc  (DISCA) , Baidu  (BIDU)  and Tencent Music  (TME)  that were executed by several major investment banks on Friday following a failed margin call.

The moves triggered significant declines in those shares last week, all of which were active in pre-market trading again Monday, and may have caused as much as $2 billion in losses for Japan's Nomura  (NMR)  investment bank and "material" losses for Europe's Credit Suisse  (CS) , each of which plunged more than 15% lower in Monday trading.

With more shares reportedly on the block for this week, and an uncertain ending that could see the ultimate unwinding of the Achegos fund, markets were trading uneasily lower heading into the Monday session, even with news of the re-floating of the Ever Given container ship in the Suez Canal providing a boost in near-term trade sentiment. 

Futures contracts tied to the Dow Jones Industrial Average are indicating a 160 point opening bell decline while those linked to the S&P 500 are priced for a 13 point pullback. Nasdaq Composite futures are indicating a modest 25 point opening bell dip at the start of trading. 

Oil prices were traded higher following news of the Ever Given's potential rescue after being grounded for more than five days on the Suez Canal's northern-most edge, with WTI futures for May delivery rising 45 cents to $61.42 per barrel and Brent contracts gaining 51 cents to $65.08 per barrel.

Elsewhere, benchmark 10-year Treasury note yields edged higher, to 1.658%, in early European trading, even as the U.S. dollar index held at a fresh fourth-month high of 92.823 as traders deciphered a host of positive economic data last week, including the lowest level of weekly jobless applications since the start of the coronavirus pandemic last March. 

Overnight in Europe, a 16% decline for Credit Suisse shares pushed the SMI index in Zurich 0.26% lower on the session, with bank stocks around the region trading in the red amid concerns for unreported exposure to the still-developing Achegos Capital story.

The region-wide Stoxx 600, however, was marked 0.13% higher on the session, while London's bank-heavy FTSE 100 fell 0.3% in the opening hours of trading.

In Asia, Japan's Nikkei 225 ended 0.7% higher as 29,384.52 points while the region-wide MSCI ex-Japan index edged 0.6% into the green lead by gains in Shanghai and Taiwan.