The recovery from this month’s banking shock is gathering momentum and looks like it will roll into Thursday, leaving investors free to pick up where they left off on Wednesday as there are no major economic or policy events on the Asian calendar.
That should mean a positive session for risk appetite and stocks, fuelled by hopes that the banking crisis is abating and investors crisis reaction to Chinese e-commerce conglomerate Alibaba’s wide-ranging restructuring plans.
Wall Street posted solid gains on Wednesday as volatility slumped to its lowest since the U.S. banking tremors were first felt three weeks ago. While bond yields inched up, bond market volatility also fell and fixed income markets were pretty calm.
The rate-sensitive Nasdaq jumped 1.8% for its best day in two weeks, boosted by positive tech company outlooks. The narrower Nasdaq 100 is now up more than 20% from its December low. Bull market?
First off, banking fears are definitely subsiding. How long this holds or whether this is justified is almost beside the point – after a few weeks of intense volatility and significant losses, financials have stopped bleeding.
The MSCI World financials index is now up three days in a row and the U.S. regional banking index has risen for four straight days, neither of which have been recorded since January.
Investors welcomed Fed Vice Chair for Supervision Michael Barr’s plain-speaking Congressional testimony which concluded on WetestimonyBarr admitted to lawmakers that officials and regulators had been caught off guard by the banking crisis and said no stone would crisisurned for learning the lessons.
Meanwhile, tech is on a tear, partly thanks to Alibaba. The Chinese conglomerate’s restructuring plans announced this week have been taken as a signal that Beijing’s regulatory crackdown on corporate is ending, propelling its shares higher and boosting investor confidence in prospects for Chinese tech firms.
Alibaba’s U.S.-listed shares followed Tuesday’s 14% rally with a 2% rise on Wednesday, and the Hong Kong-listed shares jumped 12% on Wednesday, leading the Hang Seng Index and other markets in the region higher.
Here are three key developments that could provide more direction to markets on Thursday:
– U.S. GDP (Q4)
– Fed’s Collins, Barkin, Kashkari and Waller all speak
-Germany CPI inflation (March) – Reuters
