Stocks climb after US bank rescue bolsters confidence

Share prices rose yesterday after multi-billion dollar lifelines for troubled US banks eased stress on the global financial system and shored up investor hopes that the Federal Reserve could ease its rate-hike campaign.

The benchmark Philippine Stock Exchange Composite index (PSEi) closed at 6,469.71, up 64.81 points or 1.01 percent, while the broader All Shares index gained 20.45 points or 0.59 percent to end at 3,464.27.

Total value turnover reached P8.5 billion. Market breadth was positive, 102 to 79, while 57 issues were unchanged.

“Swift actions by regulators and banks to stem the market turmoil could have contributed to market stability in Asia,” analysts at Maybank said in a note.

Major US banks injected $30 billion in deposits into First Republic Bank to rescue the lender caught up in a widening crisis triggered by the collapse of two other mid-sized US banks over the past week.

Across the region, stock markets tracked Wall Street’s gains overnight, but were set for weekly losses given the recent rout in the global banking sector.

Asian markets extended a risk rally on Wall Street to end a tumultuous week that saw a brewing banking crisis send bond yields plunging while market participants sharply lowered expectations of future interest rate hikes in Western economies.

Also, data showed overnight that banks sought record amounts of emergency liquidity from the Federal Reserve over recent days, underscoring the scale of stress in the financial system.

Meanwhile, global central bankers introduced what market watchers interpreted as an emerging effort to firewall the rate increases needed to fight inflation from separate efforts to calm concern about financial stability.

Markets are also back to overwhelmingly pricing in another 25basis-point hike from the Federal Reserve at its meeting next week, though there is a 20 percent chance of the Fed pausing instead.

“Headlines screaming that the US has seen the biggest bank collapse since 2008 naturally engender fears of a re-run of the GFC. However, the situation today is radically different to 2008,” said Shane Oliver, chief economist at AMP Bank, referring to the global financial crisis.