HONG KONG/LONDON (CNN) – Markets in Europe and Asia rallied on Friday after First Republic Bank was bailed out by a group of large US lenders, easing concerns over the current banking turmoil.
“Some optimism has returned to markets over the past 24 hours, with banking stocks stabilizing on both sides of the Atlantic,” analysts at Deutsche Bank said in a statement on Friday.
First Republic Bank (FRC) is said to be a lifeline in height from a group of America’s largest banks including JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (CBEAX), Citigroup (C) and Truist (TFC). of 30 billion US dollars received ).
The news reassured investors worried about a possible banking crisis following the collapse of two US banks and the pull of Credit Suisse (CSGKF) last week. On Thursday, US stocks closed higher as technology stocks started a rally.
European stocks posted gains on Thursday as investors were reassured by news that Credit Suisse would tap into a lifeline offered by the Swiss National Bank and borrow up to 50 billion Swiss francs ($53.7 billion).
The rally in Europe continued into Friday, although gains were modest. The benchmark Stoxx Europe 600 (SXXL) index was up 0.3% in early trade. Germany’s DAX (DAX) and France’s CAC 40 (CAC40) rose 0.4% and 0.07%, respectively.
Europe’s Stoxx Europe 600 Banks Index, which tracks 42 major banks across the EU and UK, also opened higher before remaining flat during the morning session. The index was down 13% in the week ending Thursday’s close.
London’s bank-heavy FTSE 100 (UKX) rose 0.6%.
But shares of Credit Suisse (AMJL) fell as much as 5% in early trade, paring gains made on Thursday in a sign that investor confidence in the bank’s future has not been fully restored.
In Asia, Hong Kong’s Hang Seng (HSI) closed 1.64% higher, China’s Shanghai Composite (SHCOMP) was up 0.73%, Japan’s Nikkei (N225) was up 1.2% and South Korea’s Kospi (KOSPI) was up by the Market close up 0.8%. The increases were followed by larger decreases on Thursday.
Chinese technology, real estate and financial stocks rallied across the board. Baidu closed 14% higher in Hong Kong after some investment firms gave positive preliminary reviews of the company’s ChatGPT-like app.
Property developer Country Garden ended the day up 7.7% after the Chinese property market showed signs of recovery. Official data on Thursday showed that new home prices rose in February for the first time since August 2021.
“After the recent global financial instabilities, First Republic Bank was expected to be the next falling domino,” said Yeap Jun Rong, market analyst at IG. “But an industry-wide bailout to shore up the bank’s finances provided some much-needed reassurances to ease further bank jitters.”
Investors around the world held their breath for a week after the rapid collapse of Silicon Valley Bank and Signature Bank fueled fears over the health of the global banking sector.
Worries deepened on Wednesday after Credit Suisse shares in Europe plummeted. Regulators on both sides of the Atlantic have taken contingency measures to boost confidence, including protecting deposits at SVB and Signature Bank.
European stocks largely shrugged Thursday at the European Central Bank’s decision to stick to its plan to hike interest rates by half a percentage point.
“The [rate hike] is good news against the background of persistently high inflation rates,” wrote Ulrike Kastens, economist for Europe at DWS, in a research note on Friday. “At the same time, it reaffirms its intention to intervene with liquidity measures when financial market stability is threatened.”
Investors are now awaiting next week’s interest rate decision from the US Federal Reserve. They generally expect the US Federal Reserve to hike rates by 25 basis points.