Overall, it was a good day yesterday for markets with stock indices rising in both Europe and the US. As the fall of Silicon Valley Bank is thought to be due to poor risk management, officials are now advocating for enhanced bank supervision measures to be put in place.
US and European stock indices rose yesterday as risk appetite continued to recover from the volatility in the banking sector, and investors turned their attention back to data on inflation and Personal Consumption Expenditures Price Index - which is the Federal Reserve’s (Fed) preferred price measure - to be released on Friday.
The technology sector, which includes Micron Technology Inc., the largest US memory chip manufacturer, which posted a better-than-expected outlook for the quarter, drove the S&P 500 higher. Bank shares also rose on the news that a former top executive of UBS Group AG was recruited back to lead the Swiss bank's acquisition of Credit Suisse Group A.
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Michael Barr, the Fed official in charge of banking supervision, insisted in his second appearance before the US Congress that Silicon Valley Bank's bankruptcy was only the result of bad risk management and that it was not a fundamental issue. The Federal Reserve and the government are both recommending stepping up bank supervision measures because of this, which will unavoidably result in lending limits and probably have a negative impact on economic growth.
After last week's high volatility, Treasuries were unchanged yesterday, but yields remained in the low range of their most recent trade, reflecting the fixed income market's expectation of a more severe slowdown of the economy and the Fed’s subsequent need to lower interest rates at the end of the year. Right now, the equity markets are responding favorably to this.
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The North American indices have risen for five days straight and are getting close to significant technical levels.
Yesterday, the DowJones 30 was trading above the 32820 pivotal mark. A daily or weekly closing above this region would indicate the bull market's continuation.
Despite the fact that a report published by the International Energy Agency revealed a large drop well below expectations, oil experienced its first day of decrease after last week's surge yesterday.
Technical support has been provided over the last four months by the 72.70 zone.
A close below this level would send WTI Oil looking for the next support level at 62.50.
Sources: Bloomberg, Reuters