Asian shares rise as fears easing over US banking

Asian shares were mostly higher on Tuesday as investors got some relief from worries over troubled US banks with a planned takeover of failed Silicon Valley Bank (SVB). Japan’s benchmark Nikkei 225 lost 0.1 per cent to 27,456.98. Australia's S&P/ASX 200 jumped 1.1 per cent to 7,036.20. South Korea's Kospi added 0.4 per cent to 2,419.43. Hong Kong's Hang Seng rose nearly 0.4 per cent to 19,644.68, while the Shanghai Composite inched up less than 0.1 per cent to 3,249.39.

“Asian equities were positive on Tuesday, lifted by mostly higher major indices in the previous session. Receding fears surrounding the banking crisis and surging oil prices led to solid risk-taking flows,” Anderson Alves at ActivTrades said in a report.

Markets have been in turmoil following Silicon Valley Bank's collapse, the second-largest US bank failure in history, earlier this month, and then the third-largest failure, by New York-based Signature Bank. Investors have been hunting for which banks could be next to fall as the system creaks under the pressure of much higher interest rates. On Wall Street, the S&P 500 eked out a 0.2 per cent gain to 3,977.53 after having been up by as much as 0.8 per cent. Banks and energy stocks led the gainers in the benchmark index, outweighing losses in technology and communications companies. The Dow Jones Industrial Average rose 0.6 per cent to 32,432.08, while the Nasdaq composite fell 0.5 per cent, to 11,768.84, reflecting losses in Google parent Alphabet and other tech companies. Gainers outnumbered decliners on the New York Stock Exchange by nearly 3-1.

The S&P and Nasdaq are coming off two straight weekly gains. First Citizens Bank's stock soared 53.7 per cent after it said it would buy most of Silicon Valley Bank, whose failure sparked the industry's furor earlier this month. As part of the deal, the Federal Deposit Insurance Corp. agreed to share some of the losses that may arise from some of the loans First Citizens is buying. Other banks that investors have highlighted as the next potential victims of a debilitating exodus of customers also strengthened.

First Republic Bank jumped 11.8 per cent and PacWest Bancorp rose 3.5 per cent. Most of the focus in the US has been on banks that are below the size of those that are seen as “too big to fail.” A broader worry has been that all the weakness for banks could cause a pullback in lending to small and midsized businesses across the country. That in turn could lead to less hiring, less growth and a higher risk of a recession. Many economists were already expecting an economic downturn before all the struggles for banks.

“Unfortunately this is what happens when you tighten policy that quickly,” Amanda Agati, chief investment officer of PNC Asset Management Group, said about the past year's swift rise in interest rates. “Things break in the system. Some of the weakest links are starting to show up.” The Federal Reserve has pulled its key overnight rate to a range of 4.75 per cent to 5 per cent, up from virtually zero at the start of last year.