Global equities are poised to extend gains as banking risks recede

US equities ended Thursday’s session noticeably higher, reversing some recent losses, as the banking sector continues to remain in the headlines. First Republic climbed after reports that it could receive up to $30 billion in deposits from some of the nation’s largest banks in an attempt to stabilize the lending firm. The economic calendar was busy yesterday, as jobless claims declined more than anticipated, import prices dipped, housing construction activity rose much more than projected, and manufacturing output in Philadelphia remained solidly in contraction territory. The Dow Jones Industrial Average rose 1.2%, the S&P 500 Index was up 1.8%, and the Nasdaq Composite increased 2.5%. Meanwhile, European equity markets also rebounded on Thursday, with the Euro Stoxx 50 Index up 2.0% and the Stoxx bank index recovering 1.3% from their worst day in over a year. 

Summary as at 17.03.2023 

• Asian equity markets rose on Friday, recovering from a series of sharp losses this week as the government and institutional support to stem a potential banking crisis helped improve sentiment, while traders also priced in a less hawkish Federal Reserve. Chinese bourses were the best performers for the day, with gains of over 1.5% after earlier this week Goldman Sachs hiked its Chinese GDP outlook for the year, boosting optimism over an economic recovery in the country. 
• European shares are poised to extend gains similar to their US counterparts as fears of contagion in the banking sector continue to recede. 
• Oil prices crept higher this morning on the prospect of supportive measures by the OPEC+, although fears of an economic slowdown stemming from a banking crisis kept gain limited and put prices on course for their worst week this year. Media reports said that Saudi Arabian and Russian ministers met this week to discuss potential action by OPEC+ to support crude markets, following sharp losses in recent sessions. 
• The ECB yesterday decided to go ahead and hike its benchmark interest rates by 50 bps, noting that “inflation is projected to remain too high for too long. However, the central bank removed its guidance for future rate actions, saying in its statement that “the elevated level of uncertainty reinforces the importance of a data-dependent approach to the Governing Council’s policy rate decisions.” The ECB added that it is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability.  
• Weekly initial jobless claims in the US came in at a level of 192,000 for the week ended March 11, below consensus estimates of 205,000 and the prior week’s upwardly revised 212,000 level. 
• US banks borrow a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure. Data published by the Fed showed $152.85 billion in borrowing from the discount window – the traditional liquidity backstop for banks – in the week ended March 15, a record high, up from $4.58 billion the previous week. The prior all-time high was $111 billion reached during the 2008 financial crisis. 
• First Republic Bank reversed earlier losses yesterday, and rose sharply, after reports that some of the nation’s largest banks have agreed upon a plan to deposit as much as $30 billion in an attempt, supported by the US government, to stabilize the struggling bank. This followed a noticeable decline after Bloomberg reported that it may be exploring strategic options that include a sale and weighing options for shoring up its liquidity. 
• Adobe Incorporated reported adjusted fiscal Q1 EPS of $3.80, above the $3.68 estimate, as revenues grew 9.0% year-over-year to $4.66 billion, versus the Street’s forecast of $4.62 billion. The company issued Q2 EPS and revenue guidance that came in above expectations and raised its full-year forecasts for profits, and annual recurring revenue for its digital media business. It also reaffirmed its full-year revenue outlook.