The FTSE 100 and European stocks were higher this Friday as the support packages offered to First Republic Bank and Credit Suisse restore calm for the time being.
The FTSE 100 (^FTSE) rose 1.23% to 7,500 points at the open, while the CAC 40 (^FCHI) in Paris jumped 0.92% to 7,089 points. In Germany, the DAX (^GDAXI) fell 0.96% to 15,111.
US and Asia
Across the pond, S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were mixed as trade began in Europe.
US stocks rallied on Thursday after a consortium of 11 of the biggest US banks banded together to inject $30bn in capital into troubled bank First Republic (FRC) as the sector works to stave off a broader financial crisis in the wake of multiple bank failures since last Wednesday.
The Dow Jones (^DJI) rose 1.17% to close at 32,246 points. The S&P 500 (^GSPC) climbed 1.76% to finish at 3,960 points and the tech-heavy NASDAQ (^IXIC) climbed 2.48% to 11,717.
JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC) will each deposit $5bn into First Republic, a California-based lender which saw shares sink nearly 70% over the last week, amid fears it would be the next bank at risk of a rush of customers withdrawing their deposits.
Goldman Sachs (GS) and Morgan Stanley (MS) will put in $2.5bn apiece, while BNY Mellon (BK), PNC Bank, State Street (STT), Trust and US Bank are depositing $1bn each.
Also, US investors in Credit Suisse (CS) have hit the beleaguered Swiss bank with legal action, claiming that it overstated its prospects before this week’s shares crash.
Read more: Inside the $30 billion rescue of First Republic Bank
“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a joint statement on Thursday.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 1.20% to finish at 27,333 points, while the Hang Seng (^HSI) in Hong Kong gained 1.90% to 19,567. The Shanghai Composite (000001.SS) also gained ground, rising 0.73% to 3,250 points.
FTSE 100
Back in London, UK bank share prices were up in early exchanges following the rescue deal.
Lloyds (LLOY.L), NatWest (NWG.L) and HSBC (HSBA.L) all rose by around 1%.
Richard Hunter, head of markets at Interactive Investor, said: “Investors regained some poise after the tribulations of recent days, boosted by further actions to stem the potential of bank sector contagion.”
Despite the gains in stock markets, investors remain cautious. Stephen Innes, managing partner at SPI Asset Management, said: “It turned into a relatively normal day here in Asia stocks… The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right.
Read more: Taxpayers to take £500 to £1,000 hit as UK faces worst two years on record for household incomes
“Granted, there is still a considerable element of headline risk, especially over the weekend when traders can’t react, which could again upset the proverbial apple cart on Monday morning open. Not to mention, the uncertainty around the Fed policy reaction function is keeping rates volatility elevated.”
The pound (GBPUSD=X) is trading modestly higher at around $1.2170, reaping in the benefits of a weaker dollar today.
Oil markets
Meanwhile, Brent crude (BZ=F) bounced back and was trading at around $75/barrel after a meeting between Saudi Arabia and Russia calmed markets amid strong China demand expectations, but were headed for their biggest weekly falls since December as a banking crisis rocked global financial and oil markets.
Looking at market events, next Wednesday, it will be the US Federal Reserve’s turn to decide on rates.
“Like the ECB, economists believe the Fed will adopt a ‘dual track’ policy approach, distinguishing monetary policy from macro-prudential policy. US central bankers are continuing with their fight against inflation with a 25-basis point hike, which would bring the Fed’s benchmark rate to a 4.75%-5% range,” IG said.
Watch: Big banks save California-based bank First Republic with $30bn bailout
Download the Yahoo Finance app, available for Apple and Android.
,,,
