New bank rules, Eurozone inflation fall, Alibaba plans - what's moving markets

© Reuters

By Geoffrey Smith

Investing.com -- The Biden administration is reportedly planning new rules for midsize banks to prevent any more collapses like the two seen earlier this month. Alibaba fleshes out its spin-off plans (a bit), and Eurozone inflation is set to fall as the 2022 spike in energy prices starts to pass out of the calculations. Here's what's moving markets on Thursday, 30th March.

1. White House plans new rules for midsize banks

The White House is planning to introduce new rules for midsize banks in the wake of two collapses that sent shockwaves through global markets earlier this month, according to reports.

The Wall Street Journal reported that options under consideration include tougher requirements on capital and liquidity, as well as subjection to annual stress tests – something that midsize banks successfully lobbied against in the decade after the 2008 financial crisis.

The rules would target banks with between $100 billion and $250 billion in assets – a bracket that would have included both Silicon Valley Bank and Signature Bank.

A separate report by the WSJ established that, as interest rates rose last year, U.S. banks used an accounting tactic to avoid marking down the market value of over $500B in bonds. Bond prices fall as market interest rates rise.

2. Alibaba fleshes out spin-off plans

Alibaba (NYSE:BABA) CEO Daniel Zhang said the company will sell off non-core assets and will consider giving up majority control of the six operating companies that it is creating as it transitions to a pure holding company.

In a conference call with analysts, Zhang gave away few details on how far and how fast the spin-off process would go, saying it would be decided on a case-by-case basis.

Zhang, who will remain CEO of the group’s key cloud services unit, repeated that Alibaba needs to be more “agile” in dealing with the challenge from emerging competition.

The restructuring announced by China’s biggest Internet platform company has triggered a strong rally in the last couple of days, adding over $30B to its market value. It’s still down by two-thirds since its financial services affiliate Ant Group triggered a broad crackdown on the increasing economic power of Alibaba and its peers.

3. Stocks set to extend gains as Nasdaq 100 re-enters bull market territory; 4Q GDP revision due

U.S. stocks are set to extend their recent gains at the open, with the Nasdaq 100 having re-entered a bull market for the first time since peaking 16 months ago.

By 06:25 ET (10:25 GMT), Nasdaq 100 futures were up 0.2%, while S&P 500 futures were up 0.3% and Dow Jones futures were up 126 points or 0.4%.

Sentiment is being underpinned by growing confidence that the Federal Reserve will pause its interest rate hikes while it evaluates the fallout from this month’s banking sector problems.

The final reading of fourth quarter GDP is due at 08:30 ET, along with weekly jobless claims numbers.

Stocks in focus are likely to include Constellation Software (TSX:CSU), which surprised to the upside with its latest quarter on Wednesday after the bell, and lifestyle group RH (NYSE:RH), which did the opposite. In Europe, H&M (ST:HMb) grabbed the limelight with a surprisingly strong profit in the first quarter, flattered by the first-time consolidation of one of its new businesses.

4. Eurozone inflation falls, but underlying pressures remain

Inflation numbers out of the Eurozone suggested a big drop in the headline annual rate in March but still pointed to strong underlying price pressures from the food and service sectors.

German headline inflation looks set to drop below 8% on the basis of numbers released early Thursday by the country’s biggest federal states, but that is almost entirely due to base effects from the spike in energy prices that followed Russia’s invasion of Ukraine a year ago. The same factors pushed Spanish headline inflation down by more than expected, to 3.3% from 6.0% in April.

The numbers give a degree of relief to the European Central Bank as it plots its next moves, but pressure for wage increases to offset falling living standards is growing around the region, as demonstrated by a massive wave of strikes in Germany on Monday.

5. Oil higher as Russia cuts back by less than it said

Crude oil prices pushed higher, supported by a big drop in U.S. crude stocks as the start of the U.S. driving season draws closer. A shortfall of Iraqi exports from the Turkish port of Ceyhan also continues to squeeze prices higher, although expectations of a quick resolution to the political dispute underlying the problem are mitigating its effect.

Separately, Reuters reported that Russia didn’t cut its oil production as much as it threatened over the last month, putting the actual decline in output at 300,000 barrels a day, rather than the announced 500,000 b/d.

By 06:35 ET, U.S. crude futures were up 0.7% at $73.49 a barrel, while Brent was up 0.6% at $78.04 a barrel, both blends testing a two-week high.