Investors’ confidence that banking crisis is over shows in markets

London — A steadier tone in global stocks continued on Thursday as investors hoped the banking sector had turned a corner on its recent turmoil to help markets end the quarter on a positive note.

The dollar and crude oil prices were stable, with calmer markets allowing investors to focus more on the economy, as Spanish inflation fell more than expected in March.

Global stocks were up 0.3% and on course for a 4.9% quarterly gain.

“We are starting to see a little bit of stabilisation, there is a perception that somehow the banking crisis is behind us,” said Mike Hewson, chief markets analyst at CMC Markets.

“The next few days are going to be a key test of this stabilisation with month end, and quarter end, coming up when you have a lot of funds doing a tidy up, then suddenly it’s where do we go from here?”

In Europe, the Stoxx index of 600 leading companies rose 0.8% to hit a two-week high.

Analysts said the relief rally on Wall Street on Wednesday raised spirits among investors, underpinned by firmer US stock index futures on Thursday. The rates-sensitive Nasdaq is up nearly 14% in 2023 and is heading for its best quarter in more than two years.

As the dust settles on a wild and volatile ride after Silicon Valley Bank's collapse unleashed fears of a broader banking crisis, the winners appear to be bonds and large tech companies that tend to benefit when interest rates fall.

Kevin Thozet, investment committee member at Carmignac, said investors were taking stock after a volatile quarter of big swings in the outlook for the economy, inflation and interest rates.

“We are seeing a correlation between risk on and risk off assets working again, which was not the case a year ago,” Thozet said, adding the trajectory of hiking interest rates is coming to an end.

“We think there is value is being long in duration, in buying those bonds issued by well rated issuers in the US or in the euro area,” Thozet said.

Asia’s stock markets held recent gains on Thursday as investors weighed up whether a break-up of Chinese conglomerate Alibaba signals Beijing's regulatory storm aimed at tech companies might finally be clearing.

MSCI’s index of Asia-Pacific shares outside Japan rose 0.5%. Like the S&P 500, it has recovered from March lows hit as fallout from the collapse of Silicon Valley Bank reverberated around global markets.

Japan’s Nikkei, which is heading for a 6% quarterly gain, slipped 0.3% on Thursday.

The US dollar was firm, particularly against the safe-haven Japanese yen, as investors wound back some of the positions built up in the last couple of weeks.

The yen last traded at ¥132.395 to the dollar.

From the two-year tenor all the way to the 30-year, US yields are below the current Fed funds rate of roughly 4.8% as markets have dramatically re-priced the rates outlook.

Two-year yields were little changed at 4.08%.

In Asia, investors are cheering plans from Alibaba to spin off and separately list its business units as another signal that China wants to welcome back global capital.

“We have repeatedly emphasised that 2023 is the first time in four years that economic, regulatory and Covid-19 policies have been aligned in a pro-growth, pro-business fashion,” Morgan Stanley analysts said.

Alibaba shares in Hong Kong, which rose above HK$300 in 2020, traded up 2.5% at HK$96 on Thursday. The broader Hang Seng was up 0.6%.

Elsewhere, Brent oil futures steadied at $78.79 a barrel, up 0.65%, and gold, which has surged over the past few weeks, was up 0.2% at $1,967/oz.

The euro was steady at $1.08725, while bitcoin was up nearly 1% at $28,631 and set for its best quarter for two years.

Reuters