And finally, shares in Credit Suisse have closed deep in the red, down over 13%.

That’s a hefty selloff, following its early morning warning that a significant, but unnamed, US-based hedge fund had defaulted on margin calls made last week.

US-listed shares in Nomura are also under heavy pressure, down 13.5%, after it warned it faces a ‘significant’ loss from an unnamed US client.

But the wider market is still holding up pretty well, with the S&P 500 index currently down just 0.4% (financial stocks are still weaker).

Joshua Mahony, Senior Market Analyst at IG, says the Archegos Capital margin call sell-off has led to fears over substantial losses in the banking sector.

Banking stocks in the US have lagged on concerns that the sector could be hit hard after hedge fund Archegos Capital were forced to sell huge positions in US and China stocks. While Nomura and Credit Suisse warned of heavy losses in response to this crisis, Morgan Stanley’s disclosure that they also sold billions of shares sparked a widespread move out of banks.

The question for investors is just how widespread this will turn out to be, with Nomura admitting that they are not finished unwinding positions in a move that could ultimately cost the bank $2 billion. However, today’s decline in banking stocks does provide a potential opportunity for some, with the pro-cyclical nature of the sector meaning that we are likely to see outperformance for financials as economic data, rates, and yields rise.

That’s all for today. Here’s our news story about the margin call drama:

After around 90 minutes trading, Wall Street is still trading lower.

The S&P 500 index is now down 0.75%, or 30 points, at 3,944 points - with ViacomCBS now down over 8% today.

Morgan Stanley is still in the red too, down around 3.6%, while Goldman Sachs is off 1.5%.

Other financial stocks are also weaker, with JP Morgan down 2.2%, as traders ponder the margin call blowout at Archegos -- and the implications for other market players.

Edward Moya of OANDA says Wall Street has started to look beyond life after COVID-19 and massive stimulus.

The Friday aftermath with Archegos Capital’s massive margin calls that led to the liquidation of over $20 billion in stocks won’t be immediate. With the S&P 500 index only down modestly, the damage appears to be contained.

But even if the Archegos margin call drama is a ‘one-off event’, it will have consequences, Moya points out:

Undoubtedly the over leveraging done by Archegos Capital Management, run by former Tiger Asia manager Bill Hwang, will force every prime brokerage to review their books. When you look at the stocks that were incorrectly bet on, Wall Street must ponder if the V-shaped stock market recovery got out of hand.

A US-based hedge fund defaulted on margin calls and while the reopening of the economy trade will continue, the path higher for US stocks will be complicated and filled with fresh risks. US stocks will likely finish the year much higher, but markets will remain on edge as hedge scrutiny will intensify.

The New York stock market has opened pretty calmly.

Investors are weighing up the margin call drama at Archegos, and the good news that the Suez Canal has just been unblocked.

The main indices are in the red in early trading, but there’s really no signs of panic.

• Dow Jones industrial average: down 57 points or 0.17% at 33,015 points
• S&P 500: down 10 points or 0.25% at 3,964 points
• Nasdaq Composite: down 26 points or 0.2% at 13,112 points

There are reports from Egypt that the Ever Given is, finally, afloat again (!) meaning traffic should be able to resume in the Suez Canal.

Reuters has the details:

The giant container ship that blocked the Suez Canal for almost a week was fully floated on Monday and traffic in the waterway would resume, the canal authority said in a statement.

A Reuters witness saw the ship moving and a shipping tracker and Egyptian TV showed it positioned in the centre of the canal.

Mohamed El-Erian, chief economic adviser at Allianz, is hopeful that the margin call drama at Archegos will be contained.

He told CNBC’s Squawk Box that the immediate impact of the deleveraging at Archegos looks to be ‘contained’, so he’s not too worried about the effect on the fast-moving parts of the market.

It seems to be a one-off. A one-off that had highly concentrated positions, massive leverage, and had a derivatives overlay on top of that.

That would be good news for markets in the short term. But, El-Erian also points to the slower-moving contagion forces.

Are we going to see a tightening in financial conditions? Are banks going to become more cautious?

Reaching for an automobile analogy, El-Erian adds that some market players will suffer prangs, given the amounts of liquidity sloshing in the system and the excesses that have built up.

We’ll get fender-benders like this one, but what we don’t want is a pile-up.

The investment banks Nomura and Credit Suisse have warned they are facing “significant” losses after a US hedge fund reportedly defaulted on margin calls, forcing a “fire sale” of an estimated $20bn (£14.5bn) worth of stocks that threatens to ripple across global markets on Monday.

Credit Suisse shares plunged 14% in early trading on Monday, while in Japan Nomura shares closed down more than 16%.

The global banking groups issued stock market updates on Monday, saying they were evaluating the potential hit to their financial results.

Credit Suisse, Switzerland’s largest bank, did not name the firm, but said a “significant US-based hedge fund” had defaulted on margin calls made last week by a group of lenders.

Nomura said the loss, which impacted its US subsidiary, could be worth around $2bn, based on current market prices, due to transactions with an unnamed US client.

Other European banking stocks also fell in early trading on Monday, with Deutsche Bank falling 5% and UBS down 3.8%, as nervous investors waited to see if the fallout from Friday’s dramatic sell-off in New York would spread further.

Archegos Capital, a New-York-based firm that manages the private wealth of the hedge fund manager Bill Hwang, was widely reported to be the client linked to the Credit Suisse and Nomura trading losses.

A dramatic drop in ViacomCBS’s share price last week prompted Archegos brokers including Nomura and Credit Suisse to make margin calls against their client that resulted on Friday in a massive sell-off of shares in New York, CNBC reported, citing a stock market insider involved in the trading.

More than $20bn worth of shares owned by Archegos were reportedly sold in US media companies ViacomCBS and Discovery, and Chinese tech companies listed in New York. ViacomCBS shares closed down 26% and Discovery slumped 27%.

Banks like Nomura and Credit Suisse offer broker services to clients such as Archegos, lending them money to buy shares and other assets, while also processing their trades.

However, if the value of assets held in the client’s account falls significantly, usually because of a slump in the price of shares or other publicly traded securities, the broker can make a so-called margin call, demanding that their client adds more cash or collateral to their accounts.

If clients fail to meet that demand, the broker will take steps to minimise their potential exposure to losses – including selling shares and other assets owned by the client...

More here:

Ratings agency Fitch has warned that the blocking of the Suez Canal by one of the world’s largest container ships is likely to leave the reinsurance industry facing major losses.

As efforts to shift Ever Given continue, Fitch predicts that the final insurance bill will easily run into hundreds of millions of euros.

“The ultimate losses will depend on how long it takes the salvage company to free Ever Given completely and when normal ship traffic can resume, but Fitch estimates losses may easily run into hundreds of millions of euros,”

Maersk, the world’s largest container shipping company, has warned customers that the blockage will create disruptions that will “take weeks, possibly months, to unravel.”

Maersk says (via Reuters):

“Even when the canal gets reopened, the ripple effects on global capacity and equipment are significant.”

• Footfall across UK retail destinations increased by +6.6% last week from the week before
  
  
• Footfall was +68.1% higher than in the same week in 2020, but remained -57.3% lower than in the same week in 2019
  
  
• High streets continued its steady increase, with footfall rising by +6.6% from the week before, following a +4% rise in the previous week
  
  
• Retail parks saw a rise of +9% last week as shoppers refreshed their gardens in readiness for the opportunity to meet friends and family outdoors

Retailers have been reporting that garden furniture, gazebos, outdoor pizza ovens and fire pits have all been in demand, as people prepare for some Easter gatherings;

With non-essential shops, pubs and restaurants closed, UK consumers continued to pay off their credit cards last month, at the fastest annual pace on record.

The Bank of England reports that consumer credit dropped by £1.2bn last month, taking the annual growth in credit to -9.9% -- the lowest race since the Bank began tracking it in 1994.

It adds:

Within consumer credit, the weakness on the month reflected net repayments on credit cards (£0.9 billion) with some repayments of other forms of consumer credit (£0.3 billion).

The annual growth rates of both components fell further, to -21.0% and -4.8%, respectively. Both represent new series lows.

Housing news: the number of new UK mortgage approvals fell in February, after a scramble to take advantage of the stamp duty freeze.

The Bank of England reports there were almost 87,000 new mortgages signed off last month, down from around 97,000 in January.

That’s also lower than the peak of 103,700 in November 2020, but above the average before the pandemic (67,300 in the six months to February 2020).

Mortgage demand boomed after the first lockdown ended, partly driven by the temporary freeze to stamp duty on purchases up to £500,000 in England and Northern Ireland.

That holiday was due to end this week, before it was extended to the end of June in this month’s Budget.

Steen Jakobsen, Chief Investment Officer at Saxo Bank, says Archegos Capital hedge fund’s forced position unwinding has spooked the markets.

A little known hedge fund only managing its own capital, Archegos has suddenly gained prominence on the news that counterparties were involved in a forced unwinding of its significant positions. Billions of dollars in block trades went through on Friday in the US company ViacomCBS and Chinese technology stocks among other holdings, and there is uncertainty how much more of the hedge fund’s holdings remain and could hit the market this week.

Already, Japanese bank Nomura Holdings overnight reported a $2 billion loss at its US subsidiary linked to Archegos and cancelled a bond issue, sending the company’s shares down more than 15% in Tokyo overnight. Credit Suisse also announced that the fund’s default on a margin call would result in losses for the bank.

Michael Hewson of CMC Markets says the slump in ViacomCBS and Discovery’s shares last Friday highlight the extremely high valuations in the markets.

While it can be claimed that what happened on Friday was highly unusual, what about anything that has happened over the past few years is normal or usual?

We have hundreds of companies trading at valuations that bear any, if little relation to their underlying fundamentals. That is also very unusual, yet we don’t see too many headlines about that, and now we’re suddenly worried about over-leveraged hedge funds, after a sharp realignment in two company’s share prices, that are still in positive territory for this year.

There are certainly valid questions to be raised as to what caused these big drops, however the falls were still long overdue from a technical standpoint, and if these events prompt a reassessment of where investors currently have their money, in some of these overvalued sectors, they are unlikely to be the last we see of this type of volatility.

Naeem Aslam of AvaTrade points out that several Chinese tech stocks were caught up in the margin call drama too:

Chinese stocks such as Baidu, Alibaba, and Tencent faced a heavy sell-off last week. Investors initially thought that these stocks are under immense selling pressure because of the fear of being delisted from the US stock exchanges. There is no doubt that the damage caused by the Trump administration to the US-China relationship is going to take a lot of time to be back on track, and that is if it ever goes back on track.

However, it has become clear now that the excessive sell-off in the Chinese stock that occurred on Friday was mainly because Archegos Capital Management was forced to liquidate its position.

Shares in Credit Suisse have fallen sharply in early trading.

They fell around 10% at the open, after this morning’s warning of a ‘significant loss’ from a US hedge fund defaulting on margin calls.

Nikkei Asia has a good take on Nomura’s warning, which hit its shares hard today.

Nomura Holdings on Monday warned of a potentially hefty loss at one of its U.S. subsidiaries in relation to a transaction with an American client.

“Nomura is currently evaluating the extent of the possible loss and the impact it could have on its consolidated financial results,” the financial services company said in a news release.

Nomura’s share price plunged more than 16% in Tokyo.

Nomura disclosed that an “event” on March 26 had left the U.S. client facing an estimated claim of $2 billion against it. The estimate was based on market prices last Friday and could change as the market fluctuates and the transaction in question unwinds.

The Japanese group did not elaborate on the nature of the event, and it was not immediately clear whether the incident is linked to the massive share sell-off that shook Wall Street on Friday. However according to officials at the bank, the transaction involved Nomura’s prime brokerage business, which handles orders from hedge funds.

More here: Nomura flags potential major loss at US unit

Here’s the full statement from Credit Suisse this morning:

A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks.

Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions. While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month.

We intend to provide an update on this matter in due course.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors are bracing for volatility this week after a US investment fund, Archegos Capital, was forced to liquidate billions of dollars worth of positions after being hit by margin calls.

Archegos’s move triggering wild volatility in parts of the markets, and warnings from Japanese bank Nomura and Switzerland’s Credit Suisse this morning that they will suffer losses as a result.

Last Friday, Wall Street was rocked by the mysterious sale of major stakes in Chinese technology giants and US media companies - including ViacomCBS, which slumped 26%, and Discovery which tumbled 27%. The scale of the slump triggered suspicious that a large investor had hit trouble and was being forced to sll.

And over the weekend, private investment firm Archegos Capital has emerged as the firm behind the sales.

It appears that Archegos was hit by hefty margin calls as its positions turned sour, creating a knock-on effect as other lenders then demanded their money back too.

Archegos is a “family office,” which manages the private wealth of hedge fund manager Bill Hwang.

As the Financial Times explains,

The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday.

The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks, said people familiar with the matter.

Traders buying the large blocks of stock were told the share sales had been prompted by a “forced deleveraging” by a fund. Archegos is a family office that manages the wealth of Bill Hwang, a “Tiger cub” alumnus of Julian Robertson’s legendary hedge fund Tiger Management.

More here: Traders brace after fire sale of stocks linked to Archegos

Investors are now pondering whether Archegos’s fire sales are over, and whether its crisis will have wider ramifications - particularly on other funds with highly leveraged positions (making them vulnerable to margin calls if the markets move against them).

And already today, two financial institutions have flagged that they have been hit.

Japan’s Nomura Holdings warned that it faces a “significant loss”, of perhaps $2bn, from transactions with an unnnamed US client.

Nomura says it is still evaluating the extent of the possible loss, and the impact on its results, and also canceled plans to sell dollar-denominated bonds while it works through the maths.

The news sent Nomura’s shares sliding over 16% in Tokyo.

Credit Suisse is also caught up in the fallout.

It warned this morning that “a US hedge fund client” had failed to meet its margin calls, adding that the resulting loss could be “ highly significant”, and likely to hit its first-quarter results.

Traders will also be watching the Suez Canal closely today, where days of efforts to shift the huge container ship MV Ever Given are finally starting to pay off.

The Ever Given is reportedly been shifted, nearly a week after blocking the waterway, and creating a major backlog of shipping vessels. This has raised hopes that the 200,000-tonne vessel could be fully freed soon.

The agenda

• 9.30am BST: UK mortgage approvals and consumer credit in February
• 3.30pm BST: Dallas Fed Manufacturing index for March