The RBA unexpectedly raised the rate by another 0.25%. First Republic Bank was sold to JPMorgan Chase

May 2, 2023

At the close of the stock exchange on Monday, the Dow Jones Index (US30) decreased by 0.14%, and the S&P 500 (US500) lost 0.04%. NASDAQ Technology Index (US100) fell by 0.11% yesterday.

The US manufacturing activity declined for the sixth straight month in April, the longest period since 2009 and a sign of trouble in the manufacturing sector. Order numbers improved slightly but remained in contractionary territory. The good news is that the numbers show that the manufacturing sector is contracting at a slower pace. At the same time, manufacturers face many challenges, including higher borrowing costs, tighter credit conditions, lower demand for goods and still higher prices. A senior portfolio manager at Northwestern Mutual Wealth Management Co. believes Monday’s PMI data bolstered expectations for a 25 basis point increase in Federal Reserve interest rates in May and the likelihood of a June increase.

First Republic Bank was sold to JPMorgan Chase (JPM), the second-largest bankruptcy in US history. First Republic has been struggling since the March collapse of Silicon Valley Bank and Signature Bank. Yesterday morning, the US regulators seized First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase Bank. As of April 13, First Republic had about $229 billion in total assets and $104 billion in total deposits, according to the FDIC. The FDIC estimated that its deposit insurance fund would suffer a $13 billion loss because of the transfer to First Republic.

The World Bank on Monday unveiled a new methodology and improved safeguards for assessing the business climate in 180 countries. The bank retracted its Doing Business rating in September 2021, citing an internal audit and an independent investigation that found that top World Bank officials pressured staff to change the data to favor China. A pilot issue of a new annual series called “Business Ready” will be published in the spring of 2024.

Stock markets in Europe did not trade yesterday due to the holiday. There is no doubt that Europe’s central bank will raise borrowing costs for the seventh consecutive time Thursday as inflation shows resilience. Many analysts are currently betting on a quarter-point hike. But if today’s consumer price data, especially the core indicator, shows signs of growth, the ECB could stay on an aggressive path to raise rates.

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Weaker Chinese production data outweighed support for OPEC+ supply cuts, and oil is down again. Typically, from April through fall, oil prices rise because of increased demand during the summer months. But this year, economic conditions are outweighing demand. This could lead to OPEC+ countries having to cut production again to keep prices above $80 a barrel.

Asian markets rose strongly yesterday. Japan’s Nikkei 225 (JP225) gained 0.92% over the day, China’s FTSE China A50 (CHA50) added 0.77% yesterday, Hong Kong’s Hang Seng (HK50) increased by 0.27% over the day, India’s NIFTY 50 (IND50) jumped by 0.84%, and Australia’s S&P/ASX 200 (AU200) closed positive 0.35%.

Japan’s economy is recovering moderately from the downturn caused by COVID-19, but bankruptcies are rising, according to the Japanese government’s monthly economic report. The report echoes the warning of global financial volatility in response to the recent collapse of Western banks.

The Reserve Bank of Australia (RBA) unexpectedly raised its rate by 25 basis points, saying that further monetary tightening is still needed as it takes steps to rein in the country’s stubborn inflation. The RBA said in a statement that recent data showed a welcome decline in inflation, but the main forecast is still that it will be a couple of years before inflation returns to the upper end of the target range.

S&P 500 (F) (US500) 4,167.87 −1.61 (−0.04%)

Dow Jones (US30)34,051.70 −46.46 (−0.14%)

DAX (DE40) 15,922.38 0 (0%)

FTSE 100 (UK100) 7,870.57 0 (0%)

USD Index 102.17 +0.51 (+0.50%)

Important events for today:

– Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
– Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
– German Retail Sales (m/m) at 09:00 (GMT+3);
– Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
– German Manufacturing PMI (m/m) at 10:55 (GMT+3);
– Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
– UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
– Australia RBA Gov Lowe Speaks at 14:20 (GMT+3);
– US JOLTs Job Openings (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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The RBA unexpectedly raised the rate by another 0.25%. First Republic Bank was sold to JPMorgan Chase