Global shares gain as banking sector lifelines bolster confidence

NEW YORK, March 17 — Global equities rose yesterday on news that a large group of banks were infusing cash into US lender First Republic Bank and as a lifeline from the Swiss National Bank to Credit Suisse eased fears of a global banking crisis.

European and US bond yields were also higher, as oil snapped a three-day rout.

Spot gold prices edged up.

The European Central Bank pressed forward with a 50-basis-point rate hike despite recent turmoil in financial markets.

First Republic Bank’s shares jumped nearly 22 per cent before trading was halted yesterday after several large banks were said to be in talks to deposit billions of dollars to salvage the embattled lender, three sources with knowledge of the matter said.

“The best lifelines for the banks, or any company, is when other companies are interested. The banks coming in here suggests the bleeding is stopping,” said Quincy Krosby, chief global strategist for LPL Financial in Charlottesville, Virginia.

Credit Suisse’s shares spent most of the day up around 20 per cent after the Swiss National Bank (SNB) swooped in with support.

Money markets are still largely pricing in a 25-basis-point rate hike by the Federal Reserve next week, while ECB President Christine Lagarde described her central bank’s rate rise yesterday, which took its key rate to 3 per cent, as a “robust decision” to bring inflation back under control.

“The implications for the Fed’s meeting next week suggests that the Fed will raise rates 25 basis points,” Krosby said.

The Dow Jones Industrial Average rose 371.98 points, or 1.17 per cent, to 32,246.55, the S&P 500 gained 68.35 points, or 1.76 per cent, to 3,960.28 and the Nasdaq Composite gained 283.23 points, or 2.48 per cent, to 11,717.28.

“If you take a look at global central bank rate expectations, it seems we’re nearing the end. The effects of these rate hikes are becoming destructive for the economy,” said Edward Moya, senior market analyst at data and analytics firm Oanda.

“Markets are up today, but this is like watching a slow-motion train wreck for the economy.”

The MSCI world equity index, which tracks shares in 49 nations, gained 1.27 per cent.

Europe’s STOXX 600 closed the day 1.3 per cent higher, rebounding after dropping 0.6 per cent immediately after the ECB rate-hike news to touch a fresh 10-week low.

The banking sector index gained more than 1 per cent, bouncing back from an intraday drop following the rate hike.

The SNB confirmed early on Thursday that it would provide “liquidity” to Credit Suisse, which said it was taking “decisive action” and would borrow up to 50 billion Swiss francs (US$53.76 billion or RM242.3 billion).

Europe’s banking stocks suffered their steepest one-day drop in more than a year on Wednesday in the wake of Credit Suisse’s woes, which also followed the collapse of two US banks last week.

It has demonstrated what happens when major central banks like the Fed and ECB raise interest rates by hundreds of basis points in a short period of time, said Stefan Gerlach, chief economist at EFG Bank in Zurich and a former deputy governor of Ireland’s central bank.

“Whenever you do something that large, you know there is a risk waiting somewhere in the financial system,” he said, speaking before the ECB decision was announced.

Germany’s 2-year bond yield rose to 2.616 per cent, after earlier in the session hitting its lowest level since the middle of December at 2.373 per cent.

The yield on benchmark 10-year Treasury notes rose to 3.5789 per cent, compared to 3.494 per cent on Wednesday. The two-year yield, which rises with traders’ expectations of higher Fed policy rates, touched 4.1635 per cent after closing the previous session at 3.975 per cent.

Overnight, Asian shares had fallen around 1 per cent, but it was largely a catch-up move and had none of the frenzy witnessed in Europe on the previous day.

Overnight, MSCI’s index of Asia-Pacific shares outside Japan fell 0.84 per cent after earlier hitting its lowest level this year.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 104.44.

The euro was up 0.3 per cent on the day at US$1.061, having gained 0.32 per cent in a month, as the yen gained 0.25 per cent to 133.74 per dollar.

Mexico’s peso strengthened more than 1 per cent against the US dollar in afternoon trading.

Oil prices jumped after dropping to near 15-month lows earlier in the session, supported by reports that top producers Saudi Arabia and Russia had met to discuss ways to enhance market stability.

Brent crude futures, the global benchmark, rose US$1.37, or 1 per cent, to settle at US$74.70 a barrel, while the West Texas Intermediate (WTI) crude futures gained 74 cents, or 1.1 per cent, to settle at US$68.35 a barrel.

Spot gold prices rose 0.03 per cent to US$1,918.63 an ounce. US gold futures settled 0.4 per cent lower at US$1,923 per ounce. — Reuters


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