Fears of banking contagion have begun to fade among investors, driving European and US markets higher as the bank liquidity situation stabilises.
No surprise that it was financial services (+4.4%) and banking (+3.8%) leading European markets up, buoyed also by hopes the recent banking turmoil may signal a softening of rate hike policy from the US Fed.
Shares in the beleaguered Credit Suisse (SIX:CSGN) bank rose 7.3% and UBS, which is buying out Suisse for 3 billion Swiss francs in a state-backed deal, gained 12.1%.
The continent-wide FTSEurofirst 300 index lifted by 1.3% and the UK FTSE100 index gained 1.8%.
In the US, markets turned their attention from the banking crisis to the Fed’s response, awaiting the conclusion of a two-day policy meeting.
US Treasury Secretary Janet Yellen assured the public that the American financial sector was in good shape.
“I can reassure the members of the committee that our banking system remains sound and that Americans can feel confident that their deposits will be there when they need them,” she said in prepared remarks to the American Bankers Association.
Secretary Yellen warned that more action may be needed as the market continues to respond to external pressures.
In the meantime, the KBW Nasdaq regional banking index lifted by 4.8% and Californian lender First Republic shares surged 29.5% – unsurprising since First Republic Bank trades were up a whopping 9,050% week-on-week on Tiger Trade’s platform yesterday.
At close of trade, the Dow was up 1% or 316 points, the S&P 500 gained 1.3% and the Nasdaq added 185 points or 1.6%.
Currencies fall, oil and base metals rise
Most major currencies lost out against the US dollar overnight. The Euro managed to buck the trend, rising from US$1.0703 to US$1.0786 and near US$1.0765 at American close but the Aussie dollar and Japanese yen didn’t fare as well.
The Aussie fell from US66.96 cents to US66.49 cents and was near US66.70 cents at close.
The Japanese yen fell from 131.17 yen per US dollar to JPY132.61 and was near JPY132.45 at the US close.
Global oil prices shook off their downward slide and began to lift this week, gaining 2% on Tuesday after the US Government convinced investors the banking crisis would not continue to spiral.
Russia also extended its 500,000 barrel-a-day cut to crude output through to June.
In response, Brent rose by US$1.53 or 2.1% and US Nymex rose by 2.5% or US$1.69.
Base metals also rose overnight, copper futures gaining 1.1% on the hope that interest rate hikes will pause and aluminium futures crept 0.1% higher.
Gold was a different story, with futures falling 2.1% or US$41.70 to US$1,941.10 an ounce.
Iron ore also languished on fears the Chinese Government would intervene in the steel market, shedding US$0.25 or 0.2% to US$128.01 a tonne.
Hong Kong export index rebounds
In more promising news for international markets, the Hong Kong Trade Development Council (HKTDC) Export Index rose 9.3 points to 39.0 in the last three months, signalling improving sentiment among HK exporters after the border between the island and mainland China reopened in February.
A survey by the council demonstrated that 98% of respondents reported positive impacts from the border reopening, especially from more flexible and frequent cross-border business engagements.
Releasing the survey today, HKTDC Director of Research Irina Fan said: "As normal travel between Hong Kong and the rest of the world resumes, hundreds of thousands of high-spending mainland and overseas business travellers have been coming back to Hong Kong in recent months, creating impetus for the city's economic recovery."
Fan anticipates that more global buyers will visit trade fairs in Hong Kong during the peak sourcing season to replenish inventory and meet pent-up demand.
"All these developments are the pull factors for the city's trade outlook and we expect a gradual pick-up in the second half of 2023," she said.
"Taking into account the external challenges and uncertainties, our export forecast for this year remains unchanged at a 5% growth year-on-year."