Asian shares up after First Republic aid spurs Wall St rally

BANGKOK: Shares advanced Friday in Asia, tracking a rally on Wall Street after a group of big banks offered a lifeline to First Republic Bank, the lender investors had focused on in their latest hunt for troubles in the banking industry.

Chinese markets gained more than 1 per cent while others also rose. US futures edged lower and oil prices climbed.

The S and P 500 jumped 1.8 per cent Thursday, erasing earlier losses following reports that First Republic Bank could get help or sell itself to another bank.

Markets have gyrated this week on concerns over the toll on banks from the fastest set of interest rate hikes in decades.

The turmoil flared with last week's collapse of Silicon Valley Bank, the second largest bank failure in US history.

In Asia, Hong Kong's Hang Seng jumped 1.8 per cent to 19,545.94 and the Shanghai Composite index surged 1.6 per cent to 3,278.01.

Tokyo's Nikkei 225 index gained 0.8 per cent to 27,222.25 and the Kospi in Seoul was up 0.8 per cent at 2,396.06. Shares in major Japanese banks, which fell sharply at times this week, were mostly slightly higher.

Australia's S and P/ASX 200 added 0.3 per cent to 6,985.30. Shares in India and Taiwan also rose.

Stocks rallied Thursday after 11 of the biggest banks offered help for First Republic with a combined deposit of USD 30 billion.

All told, the S and P 500 rose 68.35 points to 3,960.28. The Dow gained 1.2 per cent to 32,246.55 and the Nasdaq jumped 2.5 per cent to 11,717.28.

Since SVB's failure, investors have been on the lookout for banks with similar traits, such as lots of depositors with more tper centhan the USD 250,000 limit that's insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank's strength quickly.

First Republic Bank rose 10per cent Thursday after slumping as much as 36 per cent early in the day. In the statement announcing their deposits, the group of 11 banks said the move “reflects their confidence in First Republic and in banks of all sizes.” Across the Atlantic, European stocks rose after the European Central Bank announced a hefty increase to interest rates.

Concerns there were also easing about another bank, Credit Suisse, which has been battling troubles for years, but its plunge to a record low raised concerns just as more attention was shining on the wider industry.

Credit Suisse's stock in Switzerland leaped 19.2 per cent on Thursday after it said it will strengthen its finances by borrowing up to 50 billion Swiss francs (USD 54 billion) from the Swiss National Bank.

Much of the damage for banks is seen as the result of the Federal Reserve's fastest barrage of hikes to interest rates in decades. They've shocked the system following years of historically easy conditions in hopes of driving down painfully high inflation.

Higher rates can tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments.

That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

US Treasury Secretary Janet Yellen told a Senate committee on Thursday that the nation's banking system “remains sound” and Americans “can feel confident” about their deposits.

Wall Street increasingly expects this week's turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point.

That would be the same sized increase as last month's, half the hike of 0.50 points that was earlier expected.

The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

Some of Wall Street's wildest action this week has been in the bond market, as traders rush to guess where the Fed is heading.

The yield on the 10-year Treasury rose to 3.57 per cent from 3.47 per cent late Wednesday. Earlier in in the day, it dropped as low as 3.37per cent and has been veering sharply since climbing above 4 per cent earlier this month. It helps set rates for mortgages and other important loans.

All the stress in the banking system has raised worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

Reports on the US economy are showing mixed signals. A report said fewer workers applied for unemployment benefits last week than expected.

In other trading, US benchmark crude oil gained 76 cents to USD 69.11 a barrel in electronic trading on the New York Mercentile Exchange. It picked up 74 cents on Thursday to USD 68.35 a barrel.

Brent crude, the pricing basis for international trading, climbed 82 cents to USD 75.52 a barrel.

The dollar fell to 133.25 Japanese yen from 133.76 yen. The euro rose to USD 1.0644 from USD 1.0611.