Global stock rally as stabilizing banking sector increases risk appetite


Global stocks rallied on Wednesday as the risk appetite among investors rose due to greater stability in the banking sector.

MSCI's all-world country index, which tracks stocks in 47 emerging and developed economies, jumped by 1.22 percent on Wednesday. The index fell after the banking crisis began earlier this month but started to improve in recent days.

In the U.S., all main indexes on Wall Street gained. The blue-chip Dow Jones rose by 0.97 percent, S&P 500 gained 1.40 percent and Nasdaq added 1.81 percent. Futures tied to the three indexes were also in the green in the after-hours, indicating that the market would open higher the following day.

Ten of 11 major sectors within the S&P 500 index closed in the green. The U.S. regional KBW bank index has gained 3.8 percent this week but remains on track to lose 25 percent this month due to banking turmoil.

Asian stocks also mostly rallied after Wall Street concluded. South Korean Kospi rose by 0.38 percent, while Hong Kong's Hang Seng ended 0.58 higher. Chinese blue-chip CSI 300 also traded 0.81 higher. On the other hand, Japan's Nikkei 225 finished 0.36 percent lower after rallying in the previous session.

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In Europe, the pan-regional STOXX 600 rose by 0.97 percent on mid-day. The day before, the benchmark index finished 1.30 percent higher, partially due to an increase in bank shares after Switzerland lender UBS announced it would rehire banker Sergio Ermotti as its chief executive after the Credit Suisse takeover.

"It's probably not the last time we'll go through this process, but the worst of this one is probably past."

Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute

Analysts said the recent rally showed that global financial authorities had managed to contain the market's concerns regarding the banking sector. Sameer Samana, a senior global market strategist at Wells Fargo Investment Institute, said it would not be the last time for such turmoil to happen, but "the worst of this one" had passed.

"Some of the banks there were in the spotlight, their stock prices are starting to at least stabilize," Samana said.

Treasury yields, interest hike expectation

Rate-sensitive Treasury yields edged higher on Wednesday, implying that bond investors were still trying to gauge the impact of higher interest rates on economic growth.

Two-year Treasury yields, which usually move according to interest rate expectations, rose by 2.3 basis points to 4.085 percent. The yields previously hit a seven-month low of 3.555 percent last Friday as many investors opted for safer assets.

Analysts said the macroeconomic backdrop is better now than six months ago. The market, however, remains "skittish" due to the outlook for global interest rates. Kallum Pickering, a senior economist at German bank Berenberg, said the market apprehension would make it "prone to swings."

Data from financial firm CME showed a 60.8 percent chance that the Fed would keep the interest rate at the current range of 4.75 to 5.00 percent at the next rate policy meeting on May 3. The market expects the U.S. central bank to start cutting rates this year.

The European Central Bank (ECB) raised its benchmark rate by 50 basis points to 3.5 percent even though the banking turmoil was peaking at that time. ECB officials said they would monitor the progress of the economy before deciding on the next rate policy.

Dollar, commodity updates

The dollar index, DXY, rose by 0.137 percent on Wednesday in the forex market. The euro strengthened slightly by 0.01 percent to trade at $1.0844. On the other hand, the Japanese yen continued to weaken against the U.S. dollar, declining by 1.36 percent to 132.69 per dollar.

Gold prices slipped as Treasury yields and the dollar rallied, with spot gold losing 0.4 percent to trade at $1,965.57 an ounce.

Oil also finished lower after a choppy trading session. U.S. crude went down by 23 cents to $72.97 a barrel, while Brent fell by 37 cents to $78.28 a barrel.