BLOOMBERG – Asian stocks rose after a rescue package for First Republic Bank sparked a rally in U.S. stocks. Treasuries fell after the European Central Bank announced an interest rate hike, which bets the U.S. central bank will also raise next week.
Australian shares rose, while benchmark stock futures in Japan and Hong Kong rose at least 1%. The S&P 500 posted its biggest one-day advance since January after the biggest U.S. banks agreed to provide $30 billion in deposits to the First Republic, easing speculation that the bank could be the next to fail after the two biggest banks triggered the crisis.
Bond yields rose in Australia on Friday. It came after the two-year Treasury rate rose 27 basis points above 4%, with traders abandoning the race for a ninth Fed rate hike on Wednesday, raising odds of a quarter-point return to 80. % Markets are digesting the European Central Bank’s rate hike and the ECB president’s comments that inflation will remain too high for a long period of time.
Meanwhile, Treasury Secretary Janet Yellen’s prepared remarks to Capitol Hill on Thursday “did a good job of boosting confidence in the banking system,” B. said Art Hogan, chief market strategist at Riley Wealth Management.
“They want to see support coming from the private sector, and this is the first of many big and strong banks to support some of the banks that have damaged balance sheets,” Hogan said of the big lenders. Coming to the aid of Regional Bank.
First Republic’s news comes after Swiss regulators stabilized lifeline Credit Suisse Group AG earlier this week, easing concerns that the European lender’s problems could lead to a crisis in the region. The idea of a forced merger with larger rival UPS Group AG was scrapped on Thursday and receipts at Credit Suisse ended the session unchanged. The cost of servicing Swiss bank debt is rising.
“The fact that the market is reacting relatively favorably to the fact that we are putting in some constraints here is not necessarily a catalyst for markets to go higher,” said Meera Pandit, global market strategist at JP Morgan Asset Management. Bloomberg TV. “There are still some vulnerabilities to fix because we don’t know how it continues to evolve.”
Friday’s quarterly triple-wizard, index futures, stock index options and stock options expirations can swing trading.
Volumes of 24 inventories rose from their lows since January 2022, and signs of an easing of the banking crisis also helped lift commodities. Oil pulled out of oversold territory as turmoil in the banking sector dashed hopes for stronger demand in China’s rebound. But it’s still down more than 10% this week. Gold posted its biggest weekly gain since January 13 as traders fled to safer assets.
As traders debate whether the central bank will raise interest rates, all eyes are on the Federal Reserve’s policy meeting next week. Market prices suggest the central bank will soon start cutting rates this year.
Thursday’s data showed initial jobless claims fell below analysts’ estimates last week, while housing starts and building permits beat expectations, underscoring an economic slowdown that allowed the central bank to tighten aggressively last year.
“Central banks appear poised to deal with the problems that higher rates pose in dealing with inflation,” Louis Navellier, chief investment officer at Naviellier & Associates, wrote in his daily note. He sees the ECB rate hike as a “test” ahead of the central bank’s next meeting.
“All else being equal, too much restrictive credit increases the risk of recession,” he said. “Expect a lot of volatility in the future and be cautious as this banking crisis unfolds.”
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