Hong Kong: Asian market Shares bounced on Wednesday as the collapse of two US regional lenders eased contagion concerns, while investors turned their attention back to next week’s Federal Reserve interest rate decision.
Banks rallied on early exchanges after taking a beating the previous two days in reaction to the demise of Silicon Valley Bank and Signature Bank over the weekend, the biggest casualty since the global financial crisis.
But investor concerns were calmed by a swift response from US authorities that all depositors would get their cash and other lenders would be supported.
SVB and Signature – as well as the run on deposits at crypto bank SilverGate Capital, which ran in early March – saw ratings agency Moody’s cut its outlook for the US banking system from stable to negative.
Nevertheless, the mood on the trading floor was less somber than at the start of the week, with banks enjoying a much-needed lift.
Japan’s Sumitomo Mistui Financial gained more than three percent and Mitsubishi UFJ Financial gained nearly five percent, while South Korea’s Hana Financial Group added more than two percent. HSBC climbed over three per cent.
In broader markets, Asia saw a surge on Wall Street, led by banks, though they shrugged off morning rallies.
Hong Kong, Singapore, Seoul, Taipei and Manila all imposed more than one per cent, while Bangkok was over two per cent.
Shanghai, Sydney, Mumbai and Wellington were also up, while Tokyo and Jakarta were flat.
Traders offered little reaction to the data as Chinese retail sales dipped to zero in January-February due to the lifting of post-Covid restrictions and the country celebrating the Lunar New Year.
With temperatures dropping on US banking, traders were able to turn their attention back to the Federal Reserve’s plans for inflation and interest rates.
With a sharp rise in borrowing costs said to have helped cause the SVB crisis, the Fed has come under pressure not to inflict more trouble on other lenders with another round of big hikes.
Last week there were forecasts for a rise of 50 basis points on March 22, but traders have now reduced their bets to 25 points. Japan’s Nomura even suggested it might announce cuts.
Data showing Tuesday that US consumer prices rose six percent last month — in line with forecasts and another recession but still above the Fed target — did little to dampen those expectations.
However, it looks like the bank will not go as high as was thought last week.
Hargreaves Lansdowne’s Susannah Streeter said, “Policymakers may still feel compelled to pause on rates, reluctant to be blamed for making a bad situation worse, despite evidence that hot inflation is still a risk.” “
“While smaller banks remain under pressure, there are concerns that larger banks may take on a higher risk in lending, which could plunge the economy into a sharp recession.”
And OANDA’s Edward Moya said: “Obviously, given the market turbulence last week, it’s no surprise that expectations are in full swing for the (Fed) meeting on March 22, but Nomura’s call was somewhat There may be an overreaction to the extent of the news that came out over the weekend.
“Many banks have abandoned their rate hike calls and are expecting the Fed to hold off.”
A more upbeat mood on the trading floor was also providing support to oil prices, which were battered by concerns of a possible recession in light of the SVB turmoil.
Both the main contracts dived more than four per cent on Tuesday, but they gained nearly one per cent in early Asian trade.
“Oil markets are looking straight into that bearish tunnel as energy traders draw a straight line to the East Bank sector-driven recession,” said Stephen Innes of SPI Asset Management.
“Especially the 2008 financial crisis, which is very similar to the current financial turmoil and when the oil tanker.”
Banks rallied on early exchanges after taking a beating the previous two days in reaction to the demise of Silicon Valley Bank and Signature Bank over the weekend, the biggest casualty since the global financial crisis.
But investor concerns were calmed by a swift response from US authorities that all depositors would get their cash and other lenders would be supported.
SVB and Signature – as well as the run on deposits at crypto bank SilverGate Capital, which ran in early March – saw ratings agency Moody’s cut its outlook for the US banking system from stable to negative.
Nevertheless, the mood on the trading floor was less somber than at the start of the week, with banks enjoying a much-needed lift.
Japan’s Sumitomo Mistui Financial gained more than three percent and Mitsubishi UFJ Financial gained nearly five percent, while South Korea’s Hana Financial Group added more than two percent. HSBC climbed over three per cent.
In broader markets, Asia saw a surge on Wall Street, led by banks, though they shrugged off morning rallies.
Hong Kong, Singapore, Seoul, Taipei and Manila all imposed more than one per cent, while Bangkok was over two per cent.
Shanghai, Sydney, Mumbai and Wellington were also up, while Tokyo and Jakarta were flat.
Traders offered little reaction to the data as Chinese retail sales dipped to zero in January-February due to the lifting of post-Covid restrictions and the country celebrating the Lunar New Year.
With temperatures dropping on US banking, traders were able to turn their attention back to the Federal Reserve’s plans for inflation and interest rates.
With a sharp rise in borrowing costs said to have helped cause the SVB crisis, the Fed has come under pressure not to inflict more trouble on other lenders with another round of big hikes.
Last week there were forecasts for a rise of 50 basis points on March 22, but traders have now reduced their bets to 25 points. Japan’s Nomura even suggested it might announce cuts.
Data showing Tuesday that US consumer prices rose six percent last month — in line with forecasts and another recession but still above the Fed target — did little to dampen those expectations.
However, it looks like the bank will not go as high as was thought last week.
Hargreaves Lansdowne’s Susannah Streeter said, “Policymakers may still feel compelled to pause on rates, reluctant to be blamed for making a bad situation worse, despite evidence that hot inflation is still a risk.” “
“While smaller banks remain under pressure, there are concerns that larger banks may take on a higher risk in lending, which could plunge the economy into a sharp recession.”
And OANDA’s Edward Moya said: “Obviously, given the market turbulence last week, it’s no surprise that expectations are in full swing for the (Fed) meeting on March 22, but Nomura’s call was somewhat There may be an overreaction to the extent of the news that came out over the weekend.
“Many banks have abandoned their rate hike calls and are expecting the Fed to hold off.”
A more upbeat mood on the trading floor was also providing support to oil prices, which were battered by concerns of a possible recession in light of the SVB turmoil.
Both the main contracts dived more than four per cent on Tuesday, but they gained nearly one per cent in early Asian trade.
“Oil markets are looking straight into that bearish tunnel as energy traders draw a straight line to the East Bank sector-driven recession,” said Stephen Innes of SPI Asset Management.
“Especially the 2008 financial crisis, which is very similar to the current financial turmoil and when the oil tanker.”
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