Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Marketmind: Calm returns: Investors switch to bank fundamentals

Published 03/28/2023, 12:56 AM
Updated 03/28/2023, 01:02 AM
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 8, 2023.     REUTERS/Staff

A look at the day ahead in European and global markets from Anshuman Daga

Turbulence in global markets is gradually giving way to stability.

A day after regional U.S. lender First Citizens BancShares moved to scoop up the assets of failed Silicon Valley Bank, brave investors can probably begin to ask, "Is the worst over?"

A strong show of confidence is coming from U.S. authorities as bank regulators say the system is sound but rules need review.

A recover in U.S. markets, especially in beaten-down bank shares, lifted Asian stocks on Monday while the safe-haven dollar declined. Australian stocks outperformed, boosted by M&A activity.

(GRAPHIC: US stocks regain losses since Silicon Valley Bank collapse- https://www.reuters.com/graphics/GLOBAL-BANKS/US%20STOCKS/dwpkdkykrvm/graphic.jpg)

The relief rally in Asian equities could extend to Europe, where banking shares rose on Monday, paring last week's sharp declines.

A state-orchestrated rescue of Credit Suisse by rival UBS and turmoil among regional U.S. banks have fuelled concerns for the sector.

But analysts at asset manager Amundi say recession fears are the main culprit and European banks are not lumbered with weak assets that would pose challenges to capital or liquidity levels.

While the analysts expect a continuation of declining credit growth which is consistent with monetary tightening, they don't expect any credit crunch.

"Most European banks have plentiful capital and liquidity to support the real economy: We expect them to remain open for business and to continue extending loans to creditworthy customers."

The European Central Bank's board member Isabel Schnabel said on Monday the ECB could take a leaf from the Bank of England's book as it looks for new ways of managing liquidity in the banking sector and steering short-term interest rates in the market.

In Germany, millions of people were disrupted on Monday as airports and bus and train stations across the country came to a standstill during one of the largest walkouts in decades in Europe's biggest economy as soaring inflation stoke wage demands.

Meanwhile, a U.S. regulator sued Binance, the world's biggest crypto exchange, and its CEO and founder Changpeng Zhao for what the regulator alleged were an "illegal" exchange and a "sham" compliance programme. Zhao called the complaint "unexpected and disappointing."

Key developments that could influence markets on Tuesday:

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 8, 2023.     REUTERS/Staff

Speakers: Federal Reserve Vice Chair for Supervision Michael Barr testifies on "Bank Oversight"

European speakers: ECB President Christine Lagarde gives a speech at an opening ceremony of BIS Innovation Hub Eurosystem Centre in Frankfurt; Andrew Bailey, BoE governor Banking at Bank of England participates in a Treasury Select Committee hearing on Silicon Valley Bank

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.