Ipek Ozkardeskaya
Swissquote Bank Ltd
The selloff in First Republic Bank wreaked havoc in the US session on Tuesday.
The First Republic Bank (FRC) closed the session down by almost 50%. The FRC drama revived the bank stress. Invesco’s European banks ETF slid by 3.40%. The S&P 500 lost almost 1.58% and Nasdaq slid nearly 1.90% - even though the US yields fell across the board. The US 2-year yield fell to 3.90% as the worries about the FRC weighed on the Fed rate hike expectations and pulled the expectation of a 25bp hike at the next week’s FOMC to around 77%. This probability was near 90% before the FRC announced results.
Happily, though, PacWest – another regional bank that got hammered by the SVB collapse last month, said, after the bell, that its deposits stabilized in March.
Plus, Microsoft and Google announced better-than-expected results, after the bell, as well.
As a result, the US futures are in the positive at the time of writing, but that doesn’t mean that the stress over banks will suddenly go away. Gains could quickly evaporate if the worries continue.
Elsewhere, another big headache for investors is the US debt ceiling – which was reached earlier this year, and which forced the US government to use ‘extraordinary measures’ and to use up its cash reserves to stay afloat.
The problem is the tax receipts came in lower than anticipated in April, leading to rapidly shrinking finances for the government – which is now expected to run out of money as early as early-June if the debt ceiling isn’t lifted.
And a critical vote is set for this Wednesday!
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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