Global markets rebound on First Republic Bank’s $30 billion lifeline.
First Republic Bank Rescued by US Lenders:
First Republic Bank (FRC) is set to receive a $30 billion lifeline from a small group of the biggest US banks, including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Truist. This news helped calm investors who had been on edge over a possible banking crisis following the collapse of two US banks and the turmoil at Credit Suisse in the past week.
Market Optimism Returns:
The news of First Republic Bank’s rescue helped bring back some optimism to the markets, with bank shares stabilizing on both sides of the Atlantic. Deutsche Bank analysts noted in an email that “some optimism has come back to markets in the last 24 hours.”
European Markets Rebound:
European shares posted gains on Thursday as investors were reassured by news that Credit Suisse would receive a lifeline from the Swiss National Bank. The rally in Europe continued on Friday, although gains were modest. The Stoxx Europe 600 index rose 0.3% in early trade, while Germany’s DAX and France’s CAC 40 ticked up 0.4% and 0.07%, respectively.
Banking Sector Stabilizes:
Europe’s Stoxx Europe 600 Banks index, which tracks 42 EU and UK big banks, also started higher before trading flat by mid-morning. The index had fallen 13% by Thursday’s close. London’s bank-heavy FTSE 100 inched up 0.6%. However, shares in Credit Suisse fell up to 5% in early trade, eating into gains made on Thursday and indicating that investor confidence in the bank’s future is not fully restores.
Asian Markets Follow Suit:
In Asia, Hong Kong’s Hang Seng closed 1.64% higher, China’s Shanghai Composite increased 0.73%, Japan’s Nikkei rose 1.2%, and South Korea’s Kospi added 0.8% by market close. These gains followed larger declines on Thursday.
Chinese Stocks See Growth:
Chinese technology, home, and financial stocks rose across the board. Baidu closed 14% higher in Hong Kong after some securities firms offered positive initial reviews of the company’s ongoing ChatGPT-like language app. Real estate developer Country Garden also finished 7.7% higher after China’s property market showed early signs of recovery.
Investors Breathe a Sigh of Relief:
“After the recent global financial instabilities, First Republic Bank was expectes to be the domino that would fall next,” said Yeap Jun Rong, a market analyst at IG. “But a market-wide rescue to shore up the bank’s funds provided some much-needed reassurances to mitigate further banking jitters.”
Looking Ahead to the Federal Reserve’s Rate Decision:
Investors around the world are now eagerly awaiting the Federal Reserve’s rate decision next week. They widely expect the US central bank to raise interest rates by 25 basis points. Meanwhile, the European Central Bank has reaffirmes its intention to intervene with liquidity measures if market stability is threatenes. Investors will be closely monitoring the actions of central banks as they navigate the uncertain economic landscape.
