Stocks gain, and the dollar slips, as banking fear fades

HONG KONG (Reuters) – Global stocks rose and the dollar fell on Tuesday as a deal backed by US regulator First Citizens BancShares to buy failed Silicon Valley bank calmed broader concerns about problems in the sector.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.6% by afternoon Hong Kong time. US stock futures, S&P 500 e-minis, rose 0.1%.

Australian shares jumped nearly 1%, as lithium and commodities shares rose sharply after battery exploration firm Liontown Resources (LTR.AX) rejected a $3.7 billion takeover offer from Albemarle Corp.

Top US banking regulators said on Monday that they plan to tell Congress that the public financial system remains on solid footing after recent bank failures, but that they will comprehensively review their policies in an effort to prevent future collapses.

As fears faded, demand for safer assets eased with the US Dollar Index – which tracks the currency against six peers – easing 0.14% to 102.6 during Asian trade, extending Monday’s decline of 0.35%.

Asian currencies strengthened broadly, with the Malaysian ringgit hitting a five-week high.

However, the concerns haven’t completely gone away as Federal Reserve Governor Philip Jefferson said on Monday that the stress among small banks could hurt smaller companies the most.

“This round of uncertainty that we’re seeing, is likely to continue for some time,” said Manishi Raishudhuri, Head of Equity Research, Asia Pacific at BNP Paribas. “We haven’t seen the end of it.” He expects the volatility in global markets to continue in the future for at least one or two quarters.

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In addition to fears of any contagion from bank troubles in developed markets, Raichaudhuri said, markets have also been hit by wild shifts in expectations about what central banks in the United States and Europe might do next.

“In one day, the market expects maybe a 25 basis point rate hike or maybe a 50 basis point hike. In just a day or two, that expectation is changed to 50 basis point rate cuts in the second half of the year,” he said. .

In China, the index’s founder, Jack Ma, on Monday helped allay some private sector fears after an intense two-year regulatory campaign.

“Ma’s return to work would be a strong positive sign for China’s tech industry,” said Brock Silvers, chief investment officer at private equity firm Kaiyuan Capital.

“But the reason why this happened is not yet clear… Market watchers will quickly conclude whether a visit was a one-time event or perhaps something else,” he said.

In early European trade, futures across the region on the Euro Stoxx 50 were up 0.32% and German DAX futures and FTSE futures were up around 0.3%.

On Monday, the S&P 500 ended slightly higher as a deal for Silicon Valley bank assets helped boost bank stocks, while technology-related stocks fell on profit-taking after a strong quarter.

US Treasury bonds incurred some losses by Monday afternoon. Yields rose overnight on optimism that the stress in the banking sector can be contained, as the Treasury saw weak selling demand for two-year notes.

Benchmark 10-year yields fell to 3.5129%, down from its US close of 3.528% Monday.

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Two-year returns fell to 3.9324%. It’s higher than the six-month low of 3.555% hit on Friday but well below the 16-year high of 5.084% hit on March 8.

By Tuesday afternoon, oil prices were lower, with US crude down 0.08%, at $72.75 a barrel. Brent crude fell to $77.79 a barrel.

Oil prices rose overnight by more than $3 on Monday as some exports from Iraq’s Kurdistan region were halted, adding to worries about oil supplies, while a US bank takeover eased concerns that financial turmoil could hurt the economy and slash demand for fuel.

Gold was a little higher. Spot gold was trading at $1958.13 an ounce.

Editing by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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