Asian equities advanced Friday after a rescue package for First Republic Bank fueled a rebound in US shares. Bond yields in the region moved higher as investors continue to weigh chances of further interest rate hikes.
(Bloomberg) — Asian equities advanced Friday after a rescue package for First Republic Bank fueled a rebound in US shares. Bond yields in the region moved higher as investors continue to weigh chances of further interest rate hikes.
Stocks rose in Japan, South Korea and Australia, while stock a futures for benchmark for Hong Kong gained more than 1%. Contracts for the S&P 500 and the Nasdaq 100 little changed.
The S&P 500 notched its largest one-day advance since January on Thursday after the biggest US lenders agreed to contribute $30 billion in deposits to First Republic, easing speculation that the bank could be the next to fail after two high-profile demises touched off the crisis last week.
Bond yields climbed 20 basis points for Australia’s policy-sensitive three-year maturity and were also higher in New Zealand on Friday. This followed a 27 basis point jump in the rate on the two-year Treasury to above 4%. Traders who on Wednesday had largely abandoned bets for a ninth Fed rate hike next week upgraded the odds of a quarter-point move back to around 80%. The dollar was little changed.
Markets were also digesting a 50 basis points rate hike by the European Central Bank and comments from the ECB president that inflation is projected to remain too high for too long. The ECB rate hike added to bets the US central bank will also raise next week.
Friday’s quarterly triple witching, where contracts for index futures, equity index options and stock options all expire, could amp up swings in trading.
Meanwhile, Treasury Secretary Janet Yellen’s prepared remarks presented to Capitol Hill Thursday “did a good job of boosting confidence about the banking system,” said Art Hogan, chief market strategist at B. Riley Wealth Management.
“They’d like to see the support come from the private sector and that is likely going to be now the first of many larger, more sound banks supporting some of those banks that might have impaired balance sheets,” Hogan said of the big lenders coming to the regional bank’s aid.
The First Republic news came after a lifeline from Swiss regulators earlier this week stabilized Credit Suisse Group AG, easing worries that troubles at the European lender would lead to a cascading crisis in that region. The idea of a forced combination with a larger rival, UBS Group AG, was shot down on Thursday and receipts in Credit Suisse ended the session unchanged. The cost to insure the Swiss bank’s debt has been rising.
“That the market is reacting relatively positively to the fact that we are applying some guardrails here shouldn’t necessarily be a catalyst for markets to move much higher,” said Meera Pandit, JPMorgan Asset Management global market strategist on Bloomberg TV. “There is still some vulnerability here to a correction because we don’t know how this continues to evolve.”
Data Thursday showed first-time unemployment claims dropped more than analysts’ estimates last week, while housing starts and building permits exceeded expectations, underscoring the economic resilience that’s allowed the Fed to tighten aggressively over the past year.
Oil was little changed following a rebound on Thursday after a three-day decline amid turmoil in the financial sector. Gold was slightly higher.
Stocks
- S&P 500 futures fell 0.1% as of 9:14 a.m. Tokyo time. The S&P 500 rose 1.8%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 2.7%
- Japan’s Topix index rose 0.7%
- Australia’s S&P/ASX 200 Index rose 0.1%
- Hong Kong’s Hang Seng futures rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0618
- The Japanese yen rose 0.2% to 133.49 per dollar
- The offshore yuan was little changed at 6.8946 per dollar
- The Australian dollar was little changed at $0.6660
Cryptocurrencies
- Bitcoin rose 1.1% to $25,031.8
- Ether rose 0.9% to $1,675.2
Bonds
- The yield on 10-year Treasuries was little changed at 3.58%
- Australia’s 10-year yield advanced 11 basis points to 3.44%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.1% to $1,921.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna, Angel Adegbesan and Garfield Reynolds.
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