US stock markets are recovering: relaxation on Wall Street

Bank stocks stop falling

The S&P bank index, which has been hit by the wheels in the past two weeks, has increased, and the listings of the major banks have also stabilized. “There’s more good news than bad news on the banking front,” said Art Hogan, strategist at wealth manager B Riley Wealth. “First and foremost, the Credit Suisse-UBS merger certainly takes a lot of the stress out of the global banking system, and Signature Bank, which found a prospect over the weekend, was also something investors are feeling at least more confident about.”

At the same time, the waning fear of a banking crisis slowed the rush for safe investments. In return, the yield on ten-year Treasuries rose to as much as 3.51 percent from the previous 3.39 percent. The price of gold fell below the $2,000 mark again.

First Republic stock remains under pressure

However, the ailing US regional bank First Republic gave Wall Street a headache again, with shares falling by 50 percent at peak times. In the end there was a slump of 47 percent to $ 12.18. Investors spooked speculation that the regional lender might need a second injection of cash within days.

According to a newspaper report, JPMorgan and other major US banks are talking about aid for the ailing regional bank. Due to the large price fluctuations, trading in the share was temporarily suspended several times. Eleven major banks pledged $30 billion in aid to First Republic Bank on Thursday. Industry giants such as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo joined forces for this joint approach.

The rating agency Standard & Poor’s judged that this could “perhaps” not be sufficient. The First Republic was in trouble after the collapse of the Silicon Valley Bank (SVB). Established in 1985, the bank is ranked number 14 in the country by deposits.

Interested in Silicon Valley Bank?

According to an insider, the bank First Citizens Bancshares wants to bid for the collapsed Silicon Valley Bank (SVB). First Citizens will submit the bid to the US Deposit Insurance Fund (FDIC), says a person familiar with the plans. It is also possible that First Citizens will only submit an offer for parts of the SVB. The deposit insurance fund FDIC took over the SVB on March 10 and had already made an unsuccessful attempt to sell the institute. First Citizen declined to comment.

Amazon is cutting another 9,000 jobs

At Amazon 9,000 more employees are expected to lose their jobs. Company boss Andy Jassy announced the second wave of job cuts in an email to employees. At the beginning of the year, the world’s largest online retailer had already cut 18,000 of its more than 1.5 million jobs at the time. This time, among other things, employees of the cloud division AWS, in the advertising business and in the live streaming service Twitch are said to be affected, Jassy wrote in the email published by Amazon.

The tech giants had also significantly expanded their workforces with the business upswing in the corona pandemic. At Amazon, for example, the number of full-time and part-time employees doubled from 800,000 at the end of 2019 to more than 1.6 million at the end of 2021. Last week, the Facebook group Meta was the first of the online giants to initiate a second round of job cuts. After 11,000 jobs in November, around 10,000 more jobs are now to be cut and 5,000 vacancies not to be filled.

DAX recovers strongly

After a roller coaster ride of emotions, the domestic stock market made up ground at the start of the week in volatile trading. The DAX ended trading at 14,933 points, a daily gain of 1.12 percent. At least it didn’t look like that at the start of trading, the shock of investors about the necessary was too deep Emergency operation by the major Swiss bank Credit Suisse at the weekend by the Swiss government and central bank.

Both this emergency rescue by Credit Suisse and the concerted action of the central banks brought back memories of the 2008/2009 financial crisis with its devastating consequences for world stock markets.

Investors also experienced an extremely volatile leading index, the DAX, which fluctuated between 14,458 and 14,980 in a range of over 500 points. Such a high trading range is a sure sign that the market is particularly nervous. In the near future, the stock market will be concerned with whether the banking crisis can be contained and thus gradually lose its terror, or whether there is a risk of infection.

A matter of good faith

Shares of supposedly well-positioned banks were initially taken into custody today, but were also able to recover significantly in the course of trading with the market. Once again it became clear how quickly everything can happen when investors and customers lose confidence in their bank. High risk positions on the books, combined with the inevitable consequences of the strongest global interest rate cycle since the 1980s, have taken their toll on CS. Despite the CS drama, the confidence that 2008 will not be repeated ultimately prevailed today.

Analyst Clemens Bundschuh from the Landesbank Baden-Württemberg (LBBW) explained that the bank quake was not over yet, but that it remained manageable. The central banks are taking the banking crisis seriously, as the most recent measures to provide liquidity to the financial system show.

“Credit Suisse is our Lehman moment in Europe, but we recognize that and will not make the same mistakes,” said Robert Alster of wealth manager Close Brothers in London. The major central banks would therefore be able to identify the next banks to run into trouble and support them if necessary. “There is a lot of firepower on the part of the authorities to counter the steadily eroding loss of confidence.”

Bank stocks are recovering

In the DAX, Commerzbank turned positive, while Deutsche Bank narrowed its losses significantly. UBS shares also turned positive in Zurich. Because the archrival of CS could possibly have made a good deal. Cushioned by lavish government guarantees, the bank, which also had to be rescued in 2008, can now significantly expand its market position.

Once again it became clear how quickly everything can happen when investors and customers lose confidence in their bank. High risk positions on the books, combined with the inevitable consequences of the strongest global interest rate cycle since the 1980s, have taken their toll on CS.

“Credit Suisse is our Lehman moment in Europe, but we recognize that and will not make the same mistakes,” said Robert Alster of wealth manager Close Brothers in London. The major central banks would therefore be able to identify the next banks to run into trouble and support them if necessary. “There is a lot of firepower on the part of the authorities to counter the steadily eroding loss of confidence.”

Interest rate cycle in focus

In such a situation, the central banks are more challenged than ever. The recent market turbulence has made the calls for an interest rate pause by the US Federal Reserve (Fed), which had been raised in the previous week, louder again. The Fed originally wanted to raise interest rates by 25 basis points the day after tomorrow. In the meantime, many market participants are no longer so sure.

The fact is, however, that inflation in the country is still far too high, so that a trend change by the Fed, despite the turbulence, is neither to be expected nor to be justified. However, the statements by the central bankers around their boss Jerome Powell will, as always, be of particular importance under the impression of the weakness of the banks. Most recently, he had clearly confirmed the Fed’s restrictive course.

“The market has digested the marriage between UBS and Credit Suisse. Systemic risk has eased somewhat and everyone is excited to see what the Fed will do,” said Matt Orton, chief market strategist at Raymond James Investment Management.

US Treasury prices are pointing to the Fed staying the course. The futures contract for ten-year bonds (T-Note future) falls back, while the yield on ten-year government bonds rises to 3.47 percent. German government bonds, recently sought as a safe haven, also gave way today, with yields rising to 2.11 percent.

Rheinmetall with a dream start in the DAX

Despite all the concerns of the banks, the shares of the armaments group and automotive supplier Rheinmetall made a remarkable debut in the DAX. The paper, which has been included in the leading index since today, ended up at the top of the index and gained more than five percent. In the DAX, Rheinmetall replaced the shares in the dialysis specialist FMC, which can now be found in the MDAX, the index of medium-sized companies.

Index changes are particularly important for funds that replicate indices in real terms (physically replicating ETFs). There must then be shifted and reweighted accordingly, which can have an impact on share prices. Positive impetus also came from new analyst studies with confirmed buy recommendations for Rheinmetall.

The increasing need for military equipment and further increases in defense spending in Germany and other NATO countries mean attractive medium-term potential for the company, explained analyst Holger Schmidt from DZ Bank.

Gold at times over 2000 dollars – Euro attracts

The euro was firmer today after the dollar was less sought after as a safe haven. Most recently, the common currency was traded at 1.0723 dollars in US business, an increase of around half a percent. The European Central Bank set the reference rate at 1.0717 (Friday: 1.0623) dollars.

The emergency takeover of the major Swiss bank Credit Suisse by competitor UBS initially caused uncertainty in the morning and briefly put some pressure on the euro. During the course of the day, the situation on the financial markets eased and the euro rose. The takeover was greeted with relief by central banks around the world.

Fresh money for Varta

The ailing battery company Varta wants to get fresh money from its majority shareholder for short-term financing. The company Montana Tech Components of the Austrian investor Michael Tojner is to inject 50 million euros through a capital increase.

The prerequisite, however, is that Varta comes to an agreement with its financing banks. A comprehensive restructuring concept should bring the company back on course. The planned austerity measures will also affect the staff. According to Tojner, the restructuring concept ensures “Varta’s future viability”. The Varta share is listed in the SDAX.