Relief in the markets after measures to support the banking system

Asian markets rebounded on Friday as support measures for Credit Suisse and US banks and a reassuring message from the European Central Bank (ECB) brought relief to Europe and Wall Street a day earlier.

Eleven major US banks pledged on Thursday to rescue First Republic, the 14th largest bank in the United States by asset size, which was on the hot seat following the failures of Silicon Valley Bank, Signature Bank and Silvergate, as it… functions effectively. a wealthy customer.

The action was welcomed by US authorities, the economy ministry, the central bank (Fed) and two financial regulators and allowed the Californian bank’s shares to rise nearly 10% from a more than 30% drop. ,

The Fed said Thursday it has loaned nearly $12 billion to banks since Sunday through a new specialized program aimed at allowing them to honor withdrawal requests from their customers. Very short-term debt in general increased from barely $5 billion to $152 billion in a week.

The institution made $142.8 billion in loans to SVB and Signature Bank – two entities created by regulators to succeed a New York brand – that the US regulator closed on Sunday.

– “Don’t Do 2008 Again” –

Major US indices, which had opened the day in the red, moved into positive territory on Thursday evening, with the S&P 500 ending up 1.8%.

Wall Street is now “hopefully the worst is behind us,” said Maris Ogg of Tower Bridge Advisors. “If you take the First Republic and Credit Suisse bankruptcies out of the picture, it calms people down.”

European Central Bank President Christine Lagarde holds a press conference in Frankfurt on March 16, 2023 (AFP – Daniel Rolland).

“I don’t think we’re going to do 2008 again”, the manager expects, “because the problem doesn’t come from the credit portfolio, but from the fact that (the US central bank) raised its rates from 0 to 4″. Given, 50% in nine months.”

Asian stock markets recovered from a day earlier’s sentiment on Friday morning, with the key Nikkei index in Tokyo taking 0.69% and the broader Topix index taking 0.68%.

Hong Kong’s Hang Seng index was up 1.23% in early trade.

In Shanghai, the overall index rose 0.57% and Shenzhen 0.71%.

The recovery comes in the wake of European markets hitting higher on Thursday following a confidence message in the banking sector from the European Central Bank (ECB).

The Frankfurt-based institution raised its key interest rate by half a point and said it stood ready to intervene if necessary to “preserve financial stability” in the euro area.

Somewhat assured the close, Paris took 2.03%, Frankfurt 1.57%, Milan 1.38% and London 0.89%, although gains were less than their losses the day before.

However, the euro’s custodian remained cautious over a continuation of monetary tightening and abandoned its commitment to raise rates “significantly” more in the coming months.

Another fire was doused on Wednesday with the Swiss Central Bank’s commitment to lend up to 50 billion Swiss francs in cash to Credit Suisse, which has also been hit hard by the contagion.

After the worst session in its history on Wednesday, Credit Suisse returned 19.15%, without compensating for its nearly 25% decline the day before. During the week, the action declined further by 19.88%.

The OECD is due to release its global growth forecast for the next two years later today.

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