CommSec says international banks have cleared another hurdle, settling after an investor-led sell-off of Germany's Deutsche Bank (ETR:DBKGn) credit default swaps caused the bank’s shares to drop some 15%.
The bank’s shares have since recovered 12.9% since their lowest point on Friday, rebounding 6.2% overnight as European bank shares rose 1.4% overall.
This, combined with news that American lender First Citizens BancShares would acquire failed bank Silicon Valley’s deposits and loans, meant European markets closed higher last night.
The FTSE300 lifted by 1% and the UK FTSE100 by 0.9%, pulled higher by Healthcare stocks, which lifted 1.9%.
Novartis was a particular stand out in that sector, gaining 7.7% after its Kisqali breast cancer drug demonstrated lowered risk of recurrence in women who were diagnosed early.
US markets mostly gain
US markets also gained as fears of a banking collapse lessened, with First Citizens BancShares gaining a whopping 53.7% after the Silicon Valley deal was announced.
Shares in another recently-popular bank, First Republic, also shot up 11.8% after Bloomberg reported the US was considering greater support for banks in an effort to reinforce balance sheets.
The KBW regional banking index rose 0.6% in response, with JP Morgan Chase (NYSE:JPM) (+2.9%) and Bank of America (NYSE:BAC) (+5%) both gaining.
The Dow rose 0.6% or 195 points, the S&P500 lifted by 0.2%, but the Nasdaq shed 0.5% or 55 points.
ASX expected to rise
ASX futures were up 0.4% or 29 points overnight, indicating a lift to the market may be on the cards today.
Continued instability in the banking sector may put pressure on the RBA to pause hikes, but any further speculation will have to wait for later in the day, when the retail and consumer sentiment data is released.
RBA head of payments policy Ellis Connolly will also deliver a speech to the Australian Financial Review Banking Summit, which may offer some clues as to which way the central bank will turn.
In other news:
- The Euro rose from US$1.0744 to US$1.0797 and was near US$1.0795 at the US close.
- The Aussie dollar dipped from US66.63 cents to US66.34 cents and was near US66.50 cents at the US close.
- The Japanese Yen slipped from 130.65 yen per US dollar to JPY131.76 and was near JPY131.60 at the US close.
- Oil prices rose by more than US$3 after Iraq was forced to pause crude exports to the tune of 450,000 barrels from the semi-autonomous Kurdistan region.
- Brent crude oil price rose by US$3.13 or 4.2% to US$78.12 a barrel.
- US Nymex crude oil price gained US$3.55 or 5.1% to US$72.81 a barrel.
- Aluminium futures gained 1.5%
- Gold futures fell US$30 or 1.5% to US$1,953.80 an ounce.
- Spot gold was trading near US$1,957 an ounce at the US close.
Labor secures Greens backing on Safeguard Mechanism for climate bill
Yesterday, the Federal Labor and Greens parties came to an agreement on a Safeguard Mechanism in Labor’s proposed climate bill, which would put a hard cap on emissions produced by facilities covered under the scheme.
The bill does not forbid the commencement of new fossil fuel projects, but it does create a hard ceiling on the level of potential emissions the government will accept for any new project.
The key points of the bill include:
- A hard cap on real emissions that will ratchet down over time
- Powers for the minister to act should fossil fuel projects breach the cap, including stopping or restricting the project, with legal enforcement.
- 100% carbon offset of Beetaloo gas project from day one
- Any new gas projects will also need to be 100% carbon offset by day one.
- Improved integrity measures around carbon offsets, in line with expert concerns.
- Limiting public subsidies to new fossil fuel projects from the Powering the Regions Fund and changing the grant funding powers in the Act to prevent funding for coal and gas extraction.
- Improvements to the integrity of Australian Carbon Credit Units, with a freeze on the Human Induced Regeneration offsets until an independent audit is conducted.
"They do two things, strengthen accountability, transparency and integrity of the scheme and, secondly, provide extra support for those strategic manufacturing industries that are so important for our economy and transition as well," Climate Change Minister Chris Bowen said of the amendments.
The opposition did not support the changes, with Shadow Climate minister Ted O'Brien saying the deal would throw out the balance between cutting emissions and growing the economy.
The Australian Business Council (BCA) was more supportive.
"Additional support for trade-exposed businesses and workers, as well as critical sovereign capabilities, is a crucial step that will help save jobs and ensure Australian businesses are competing on the global stage," BCA chief executive Jennifer Westacott said.
"As designed, the safeguard mechanism and its baseline targets are tough but achievable, so we'll be working with members to assess the full impact of proposed changes."