Shares in Asian markets bounced back on Friday, setting for a positive finish to a turbulent week, as major Wall Street banks committed a $30 billion deposit in US-based First Republic Bank in an effort to boost confidence in the banking system, while investors sharply reduced expectations of future interest rate hikes in Western nations.
First Republic Bank will receive up to $30 billion in deposits from as many as eleven different U.S. banks, including Bank of America, Wells Fargo, Citigroup and JPMorgan Chase. Investors reacted positively, pushing the troubled lender’s shares up 10%, with all three main US indexes closing higher.
As of 9.41 A.M. Bangkok time, Hong Kong’s Hang Seng index climbed 1.11% and the Hang Seng Tech jumped 3.6%. In mainland China, the Shanghai Composite rose 0.89%.
The Nikkei 225 in Japan traded 0.62% higher.
South Korea’s Kospi was also up 0.63%, while the S&P/ASX 200 in Australia inched up 0.15% with banks seeing minor gains reversing Thursday’s losses.
The European Central Bank (ECB) raised interest rates by 50 basis points overnight to combat inflation, as had been widely expected; this was bolstered by the Swiss National Bank’s huge support for Credit Suisse Group AG, which drove the struggling lender’s shares up by 20%.
After increasing rates as expected, the ECB refrained from offering forward guidance for future increases. Futures on the European Central Bank’s benchmark interest rate (known as the Euribor) already reflect expectations for a rate increase of 25 basis points (0.25%) at the May ECB policy meeting, with further increases already factored in.
The majority of market participants now expect the U.S. Federal Reserve to raise interest rates by 25 basis points at its meeting next week. Nevertheless, investors still factor in a 20% probability that the Fed may instead pause policy.