Trending
Stocks
  • MSFT
    321.21 USD 0.89%
  • AMZN
    115.02 USD -1.07%
  • AAPL
    174.22 USD -0.55%
  • NFLX
    363.05 USD -0.64%
  • NVDA
    311.79 USD -0.28%
  • META
    248.34 USD 1.09%
  • BRKA
    501198.61 USD -1.19%
  • T
    16.38 USD 0.43%
  • ADBE
    372.09 USD 0.22%
  • TSLA
    188.89 USD 4.85%
  • MMM
    101.72 USD 2.71%
  • SP500
    4193.05 USD 0.02%

Financial sector jumps as Yellen calms investors

Markets think the crisis is over, bidding up regional banks and the whole financial sector.

Dip buyers came in following early Monday stock market falls spurred by worries over elements of the emergency arrangement between Credit Suisse and UBS on Sunday evening. Many individuals believe that a significant amount of negative news has already been priced in.

Concerns are in no way resolved. Regional banks may see a run on deposits, and Federal authorities are attempting to prevent this. Increasing interest rates and tighter financial conditions are possible indicators of a forthcoming recession. A surge in Deutsche Bank’s default insurance premiums indicates that contagion worries persist.

Another interesting article: The week finally started with less negativity

Market players are also observing how officials ease the outcry over Credit Suisse’s Additional Tier 1 bonds – the riskiest type of bonds whose holders were wiped out by the merger. Since the 2008 financial crisis, AT1 debt has been a crucial source of funding for banks. As a result of a decline in AT1 debt of other European lenders, there are worries of a market freeze-up.

Yellen offers further help

Earlier today, Treasury Secretary Janet Yellen offered more help to depositors, and a second attempt to save the struggling San Francisco bank First Republic took place.

You may also read: EUR/USD approaches 1-mth highs amid USD weakness

Furthermore, according to sources with knowledge of the issue, JPMorgan Chase is now advising First Republic while the bank explores alternative possibilities. These individuals mentioned the possibility of raising funds from outside investors. Some investors also mentioned converting certain deposits offered by larger banks into stock.

During a question-and-answer session on Tuesday at the ABA convention, she stated that the current banking issue is “distinct” from the 2008 financial collapse. Rather, we are seeing spreading bank runs.

The public, she continued, “should have trust in our banking system, and it is our goal to stay cautious in the days and weeks ahead…that might involve acting if a smaller bank encounters the types of challenges we’ve observed that represent a danger of contagion.”

Sunday, S&P Global cut the bank’s credit rating three notches further into junk status and warned it might fall lower if, among other things, the bank could not stabilize deposits. The Wall Street Journal said that clients withdrew $70 billion in deposits from First Republic, but the outflow stabilized on Friday after 11 banks announced $30 billion in fresh deposits.

Fed in focus

This week’s FOMC meeting concludes tomorrow, and futures traders assign a probability of higher than 80% probability that the Fed will hike rates by a quarter-point. This is less than what was anticipated only two weeks ago, but it is more than a pause as the Fed continues its efforts to tame inflation.

The existing home sales report for February indicated a 14.5% month-over-month increase and 4.58 million yearly sales, both of which were higher than anticipated.

FRC daily chart

FRC daily chart, source: author´s analysis, tradingview.com

Comments

Post has no comment yet.

Want add your comment? Sign up or Sign in