The ASX 200 lost its early momentum with the bourse down slightly, down 6 points to 6959.6 at noon with seven sectors lower, despite a Wall Street rally on news that major players in the financial sector were stepping in to help stabilise it after a week of turmoil.
The energy sector was the strongest performer with Woodside and Santos both up more than one per cent. The property sector was the biggest drag with shopping centre operator Scentre down 1.7 per cent, property developer Mirvac down more than two per cent and GPT more than 3 per cent lower. This follows a 1.5 per cent fall on Thursday as the Credit Suisse crisis sent local stocks broadly lower.
The S&P 500 jumped 1.8 per cent for its best day in nearly two months after 11 of the biggest banks said they would deposit a combined $US30 billion ($45 billion) into First Republic Bank. The Dow Jones Industrial Average erased an early loss of 300 points to climb 371 points, or 1.2 per cent, while the Nasdaq composite jumped 2.5 per cent.
This week has been a whirlwind for markets globally on worries that banks may be bending under the weight of the fastest set of hikes to interest rates in decades. The concerns have been flaring since Friday’s collapse of Silicon Valley Bank, which was the second-largest bank failure in US history.
Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $US250,000 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 has been at the centre of the market’s swivels, and it rose 10 per cent on 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.”
Besides stocks, Treasury yields also strengthened suddenly following the first reports of a possible rescue by the industry. That was a sign of increased confidence from the bond market.
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 helped cause markets to tumble sharply Wednesday. The Swiss bank 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.