World shares up after First Republic aid spurs Wall St rally

BANGKOK –

Markets advanced Friday in Europe and Asia, tracking a rally on Wall Street after a group of big banks offered a lifeline to First Republic Bank, the latest U.S. lender in the spotlight for troubles in the banking industry.

Shares rose in Paris, London, Tokyo and Hong Kong but edged lower in Mumbai. U.S. futures edged higher, while oil prices gained.

The S&P 500 jumped 1.8% Thursday, erasing earlier losses following reports that First Republic Bank could get help or sell itself to another bank. Markets have gyrated this week on concerns over the toll on banks from the fastest set of interest rate hikes in decades. The turmoil flared with last week’s collapse of Silicon Valley Bank, the second largest bank failure in U.S. history.

“The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

Germany’s DAX gained 0.9% in early trading, to 15,102.37 and the CAC 40 in Paris was up 0.7% at 7,075.74. In London, the FTSE 100 rose 0.8% to 7,471.98.

The future for the S&P 500 inched 0.1% higher while that for the Dow Jones Industrial Average was unchanged.

In Asia, Hong Kong’s Hang Seng jumped 1.8% to 19,548.26 and the Shanghai Composite index added 0.7% to 3,450.55.

Tokyo’s Nikkei 225 index gained 1.2% to 27,333.79 and the Kospi in Seoul was up 0.8% at 2,395.69. Shares in major Japanese banks rebounded after falling sharply at times this week.

Australia’s S&P/ASX 200 added 0.4% to 6,994.80. India’s Sensex was 0.1% higher while Taiwan’s Taiex surged 1.5%.

Stocks rallied Thursday on Wall Street after 11 of the biggest banks offered help for First Republic with a combined deposit of $30 billion.

Since SVB’s failure, investors have been on the lookout for banks with similar traits, such as many depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., tech startups and other highly connected people who can spread worries about a bank’s strength quickly.

First Republic Bank rose 10% Thursday after slumping as much as 36% early in the day.

The Federal Reserve’s fastest barrage of hikes to interest rates in decades, to drive down inflation, has shocked the banking system following years of historically easy conditions. Higher rates raise the risk of recession and hurt prices for stocks, bonds and other investments. That latter factor hurt Silicon Valley Bank, since high rates forced down the value of its bond investments.

U.S. Treasury Secretary Janet Yellen told a Senate committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

Wall Street increasingly expects this week’s turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, half the hike of 0.50 points that was earlier expected.

The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

All the stress in the banking system has raised worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

Reports on the U.S. economy are showing mixed signals. A report said fewer workers applied for unemployment benefits last week than expected.

In other trading, U.S. benchmark crude oil gained 73 U.S. cents to US$69.08 a barrel in electronic trading on the New York Mercantile Exchange. It picked up 74 U.S. cents on Thursday to US$68.35 a barrel.

Brent crude, the pricing basis for international trading, climbed 78 U.S. cents to US$75.48 a barrel.

The dollar fell to 133.26 Japanese yen from 133.76 yen. The euro rose to US$1.0664 from US$1.0611.