A group of major US banks is pledging to put $45 billion into First Republic bank, while Westpac now expects the RBA to hold fire next month despite Europe's central bank hiking rates.
Wall Street was happy about it, but the response on the ASX has been much more muted.
Look back at Friday's market developments with our blog.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Market snapshot as of 4:15pm AEDT
By Kate Ainsworth
- ASX 200: +0.39% at 6,993 points
- All Ords: -0.5% to 7,188 points
- Australian dollar: +0.9% at 67.14 US cents
- Dow Jones: +1.17% to 32,246 points
- S&P 500: +1.8% to 3,960 points
- Nasdaq: +2.69% to 12,581 points
- DAX: +1.6% to 14,967 points
- FTSE: +0.89% to 7,410 points
- Brent crude: -0.11% to $US74.61/barrel
- Spot gold: +0.61% at $US1,930.82/ounce
- Iron ore: -2.7% at $US128.70/tonne
- Bitcoin: +4.2% to $25,794
ASX rebounds to finish higher for the week
By Kate Ainsworth
The S&P/ASX 200 rounded out today slightly higher, gaining 0.39% to 6,993 points.
That's been largely due to energy stocks performing well — the sector was up by 1.94%.
The top performers of the day were (unsurprisingly) energy stocks — Paladin Energy was up 6.90%, Liontown Resources finished with 6.23%, while Telix Pharmaceuticals gained 5.10%.
As for the worst performers, Kelsian Group shed 7.60%, followed by Evolution Mining which was down 5.51%, and Gold Road Resources dipped 3.7%.
Overall this week the ASX lost 2.12%, but is about where it was this time last year.
And that brings this markets live blog to a close — thanks for your company today, and throughout the week.
We'll be back to do it all again from Monday!
If you're looking for a career change, may I suggest rat farming?
By Kate Ainsworth
You might think I'm joking (and fair enough, I didn't believe it either initially) but it turns out rodent farming is a *real thing*.
It's proving to be lucrative for former dairy farmer Cheryl Martin, who found there was a shortage in rodent supply for pet reptile food during COVID.
It seems like an unusual sector to get into, but Ms Martin says it's making her the most money she ever has from farming.
If you want to educate yourself like I just did, the full story from Kerry Straight is below:
Could Australia have a four-day working week? The Productivity Commission says it's possible
By Kate Ainsworth
Meanwhile in Canberra, the Productivity Commission has dropped its latest five-year review into how Australia can improve productivity, lift wages for workers, and give them more leisure time.
It's proposed more than 70 reforms for the economy and our workplaces, which include:
- Tackling climate change
- Overhauling working visas
- Requiring universities to provide lectures online and for free; and
- Expanding student loan schemes
The Productivity Commission says Australia could also have a four-day working week without any loss of income, if we had kept pace with other countries.
There's a lot to the report (it's 1,000 pages long, after all), but if you want to read more about what its proposing, political reporter Jake Evans has you covered:
ANZ still sees two more RBA interest rate rises
By Michael Janda
We posted earlier about Westpac's decision to lower its peak Reserve Bank cash rate forecast from 4.1 to 3.85 per cent, with a pause in April.
However, ANZ's economists have doubled down on their forecasts for two more consecutive rate increases and a peak cash rate of 4.1 per cent, despite the market now pricing in a virtual certainty of rates remaining on hold next month.
"For the RBA we suspect the major consideration in assessing the balance of the domestic fundamentals (which in our view support the case for further tightening) versus developments offshore, will be the potential for spill-over into the real economy.
"While it is early days, this does not seem to be material in the context of the broader Australian economy yet.
"It is worth recalling the RBA did tighten in 2007 and 2008, with domestic considerations overriding market volatility, albeit from a different starting point."
The Reserve Bank governor recently said that it would make its April rates decision based on four key data releases before that meeting.
We saw two of them this week, with the NAB business survey showing conditions still strong even as confidence dipped again, while the ABS jobs data showed an increase in employment of almost 65,000 people.
"A reflection of the robustness in the domestic data was the February labour force survey, which showed a strong gain in employment and a fall in the unemployment rate back to 3.5%," ANZ observed.
"An increase in the unemployment rate would likely help return inflation to the RBA's target band. An unemployment rate in the low to mid 4's would be more consistent with the inflation target than one in the mid 3's."
We'll have to wait until the week after next to get the full retail sales figures for February and the latest monthly inflation indicator from the ABS.
Latitude staying quiet about their cyber attack — for now
By Kate Ainsworth
It's been over 24 hours since Latitude Financial told the ASX they'd been hit by a cyber attack, but we haven't heard much more from the company since.
What we do know is that last night the company began emailing their millions of customers, essentially saying that they've been hit by a cyber incident, and they'll update customers as they confirm whether or not their data has been stolen.
Apart from that generic email that's been sent out, the only other communication from the company we've seen is them replying to comments on social media to customers who are concerned their call centre is down too.
Those comments by Latitude Financial on social media seem to indicate the potential closure of their customer service centre, or just the fact no one is picking up the calls, is linked to the cyber incident because they've had to shut down multiple systems.
But a quick search on Twitter shows customers are less than impressed with Latitude's communications.
The ABC has put a stack of questions to Latitude about the incident — including whether they've been asked to pay a ransom — but they're staying quiet for now.
As soon as we hear from them though, we'll share their response.
In the meantime, if you're one of the more than 300,000 Latitude customers affected, here's what we know about the incident:
Depositor strike?
By Michael Janda
Hi. The root cause for SVB is the raise of interest rates reduce value of bonds. If we do want to display our disapproval of RBA action, if each Aussie draw 1k out of savings, it is in theory 15B loss in liquidity & wouldnt that cause similar affect as SVB and force the RBA to reverse the course of interest rate rise to salvage value of bonds?
- APham
Interesting comment APham.
If I read your comment correctly, you're basically suggesting a form of collective action by depositors to force the Reserve Bank's hand.
Conceptually, millions of Australians withdrawing cash and sparking a bank run could cause a funding crunch and enough financial market chaos for the RBA to change direction.
However, it would probably take much more than $1,000 each. A $15 billion deposit shortfall probably wouldn't make a huge dent for the big banks and, even if it did, the RBA would likely step up with funding just like the Swiss National Bank did for Credit Suisse.
Also, if a shortage of deposit funds is the problem, then the logical solution is higher, not lower, interest rates to attract those funds back into deposit accounts.
In short, aside from the difficulty (read impossibility) of organising almost every Australian to withdraw money at the same time (including those who are benefitting from higher rates because they are net savers) I don't think this would ultimately accomplish your stated aim.
APham is still keen on the idea, with this subsequent response.
"Hi Michael,
"It is hard to convince 15 mil people but if 1.5 mil mortagees act together with 10k it is not inconceivable.
"I think it is all about return on investment. Taking 10k out of redraw will result in $44 a month extra interest (500k @5%) but if it force a pause on the next 0.25% increase, it is the savings of $104 not having to pay extra per month for the same loan amount by calculation. It is short term pain for long term gain.
"Of course organising is hard with conflicting parties but it is academically possible."
With global financial markets on edge, could contagion take hold?
By Kate Ainsworth
It's a nervous time for the global financial market, but just how worried should we be here in Australia?
That's just one of the questions Alicia Barry put to Barrenjoey's chief investment strategist Damien Boey for The Business last night.
He says Australian banks have very limited exposure to what's happening with Credit Suisse — but it's the indirect effects analysts are watching closely.
If you missed the chat, you can catch up below (it starts around the 2 minute mark):
Here's how the markets are looking at 12pm AEDT
By Kate Ainsworth
- ASX 200: -0.1% at 6,959 points
- All Ords: -0.03% to 7,150 points
- Australian dollar: +0.27% at 66.72 US cents
- Dow Jones: +1.17% to 32,246 points
- S&P 500: +1.8% to 3,960 points
- Nasdaq: +2.69% to 12,581 points
- DAX: +1.6% to 14,967 points
- FTSE: +0.89% to 7,410 points
- Brent crude: -0.11% to $US74.61/barrel
- Spot gold: +0.05% at $US1,920.19/ounce
- Iron ore: -2.7% at $US128.70/tonne
- Bitcoin: +1.5% to $25,109
Westpac forecasts April pause from RBA before final interest rate rise in May
By Michael Janda
Westpac's economic team had been forecasting a couple more rate rises from the Reserve Bank, which would have taken the cash rate to a peak of 4.1 per cent.
However, the combination of a change in the RBA governor's language, some weaker domestic data and, most importantly, the changing global financial landscape have prompted a change in view.
The bank's veteran chief economist Bill Evans published a note today forecasting no rate move at the RBA's April meeting before one more 0.25 of a percentage point hike in May, which would take the cash rate to a peak of 3.85 per cent.
Remember, that's up a whopping 3.75 percentage points from where it was at the start of May last year, in the fastest string of rate hikes since Australia made its central bank independent from government.
The outlook for the US banking sector, economy and its effect on the Fed's interest rate decisions is key to the change in view.
"As we write, the most realistic risk scenario for the US economy involves a credit squeeze from regional banks (generally those with assets below $US250 billion, and that are not subject to the strict Dodd–Frank regulations, having been exempted following active lobbying of the Trump government in 2018).
"As markets, regulators and rating agencies restrict the capacity of these smaller banks to support SMEs and small business (around 50% of total market coverage) a new drag will emerge for the US economy.
"This is also likely to undermine confidence and raise some questions about the stability of the global banking system.
"Wildly gyrating markets are highlighting the uncertainty around this scenario."
With that in mind, Westpac expects the US Fed to raise rates just once more, next week, by 0.25 of a percentage point, not half a percentage point as had previously been tipped.
Mr Evans is of the view that the RBA will take a cautious approach in light of global uncertainties.
"Even if the markets settle by the time of the RBA's April board meeting there will be sufficient uncertainty for a prudent board that was already clearly open to a pause to take that option."
Financial market traders generally agree that the RBA will pause next month, with that priced in as a 99 per cent near certainty.
The other 1 per cent leans towards the possibility of a rate cut.
However, Mr Evans thinks that, if the banking turmoil settles down, the March quarter inflation figures released in late April will give the RBA an excuse to lift rates one more time in May.
Here's why Kelsian Group's shares have slumped this morning
By Kate Ainsworth
It's all to do with the fact they announced they're acquiring All Aboard America! Holdings earlier this week.
That acquisition is going to cost them a tidy $325 million, so the transit operator has announced its raising $281 million in equity to fund its purchase.
But doing so has caused its share price to slump — in act, it's the most the group has fallen in about seven months.
PayPal makes enforceable undertaking to comply with anti-money laundering rules
By Michael Janda
Global payments giant PayPal's Australian operations have agreed to an enforceable undertaking with financial crime watchdog AUSTRAC to enhance compliance with anti-money laundering counter-terrorism financing (AML/CTF) laws.
AUSTRAC had identified concerns with PayPal's systems, controls and governance in relation to international funds transfer reporting.
The regulator said PayPal has already undertaken a lot of work, including an independent audit, to strengthen its reporting regime and, through the undertaking, has committed to continuing this work.
"PayPal has cooperated with AUSTRAC throughout the course of our regulatory enquiries demonstrating its commitment to maturing its AML/CTF compliance arrangements," said AUSTRAC's chief executive Nicole Rose in a statement.
"AUSTRAC will continue to work with PayPal to ensure that the changes and enhancements made to PayPal's AML/CTF program are appropriate and sustainable and that the complex and technical work undertaken by PayPal has met its objectives in the real time operational environment."
If PayPal is in the future found to not be complying with its enforceable undertakings, AUSTRAC would have the right to commence enforcement action in the Federal Court.
Market snapshot at 10:45am
By Kate Ainsworth
- ASX 200: +0.21% at 6,979 points
- Australian dollar: +0.14% at 66.33 US cents
- Dow Jones: +1.17% to 32,246 points
- S&P 500: +1.8% to 3,960 points
- Nasdaq: +2.69% to 12,581 points
- DAX: +1.6% to 14,967 points
- FTSE: +0.89% to 7,410 points
- Brent crude: +1.4% to $US74.70/barrel
- Spot gold: +0.12% at $US1,921.49/ounce
- Bitcoin: +1.2% to $25,039
Gold producers are off to a bad start
By Kate Ainsworth
At the other end of town, gold producers are among those making up the bottom five this morning.
But the biggest dip so far has been Kelsian Group — they were formally known as SeaLink Travel and operate transport services — they're down 8.23% in early trade.
Here's quick run through of the others who have dipped:
- Perth-based gold producer Capricorn Metals is down 4.57%
- Gold producer Silver Lake Resources is down 3.17%
- Gold producer in WA and the NT, Northern Star Resources is down 3.05%
- WA gold producer and explorer Gold Road Resources is also down 3.04%
A mixed bag of early top movers on the ASX
By Kate Ainsworth
Let's take a quick look at the top five movers now markets are open.
- Mineral exploration company Liontown Resources Ltd is up by 3.28%
- South Australian-based lithium mine Core Lithium Ltd is also up by 3.03%
- Business travel management company Corporate Travel Management has lifted by 2.57%
- NZ-based builder Fletcher Building Ltd is higher at 2.44%
- Healthcare company Nanosonics Ltd is up by 2.39%
ASX opens slightly higher after Wall Street's recovery
By Kate Ainsworth
The S&P/ASX 200 has opened slightly higher this morning, up 0.37% to 6,988 points after Wall Street climbed on news that major US banks were stepping in to safeguard First Republic.
So it's not too surprising that the financial sector is leading the gains — it's up 1.1% in early trade.
Energy has also bounced bank after steep falls early in the week, up 1%.
Industrials and technology are also up slightly, around 0.5% each.
ECB hikes rates in Europe despite Credit Suisse turmoil
By Emilia Terzon
A lot has changed very quickly in the last 24 hours.
After turmoil hitting Credit Suisse, the bank was late yesterday afternoon (our time) provided with a 50 billion Swiss francs ($81 billion) lifeline from the Swiss National Bank.
It's a rare but significant move by a central bank.
Essentially, it provides guaranteed funding to ensure Credit Suisse meets its regulatory obligations.
There was a lot of speculation that Europe's central bank would take the Credit Suisse saga into consideration when making a decision on whether it would hike interest rates there again.
The Swiss National Bank announcement couldn't have been more timely. It came just as the ECB was poised.
And it delivered up another 50 basis points hike.
That has it sticking with its fight against inflation and facing down calls by some investors to hold back on policy tightening until turmoil in the banking sector eases.
The ECB's new rate of 3% is it's the highest level since late 2008.
While it said it was too early to predict future rate moves, the ECB rejected suggestions that its campaign to tame inflation was a threat to financial stability, arguing that euro zone banks were resilient and that if anything, the move to higher rates should bolster their margins.
ECB President Christine Lagarde told a news conference:
"I think that the banking sector is currently in a much, much stronger position than where it was back in 2008."
An ECB Governing Council statement said it was monitoring market tensions and would respond as necessary to preserve price stability and financial stability in the euro area.
But the statement offered no commitments for future rates, despite indications by many of its policymakers that more big moves would be needed in the fight against inflation.
What we know about the First Republic rescue plan
By Emilia Terzon
Firstly, a bit of background on First Republic.
It's another one of those US banks that has a large amount of deposits that are over US$250,000.
That's the cut-off point for deposits to be insured against losses.
About 70% of First Republic's deposits are uninsured, above the median of 55% for medium-sized banks, and the third highest in the group after Silicon Valley Bank and Signature Bank.
After Silicon Valley and Signature Bank's collapse, contagion was was spreading to First Republic about its deposits.
Its shares lost two-thirds of their value in the past week. And it had to be put into a trading halt several times.
The bank had said on Sunday that it had more than US$70 billion in availability liquidity, but that wasn't enough to keep investors from spooking.
So now we have a bunch of bankers stepping in.
The announcement from some of the biggest names in finance, including some you may remember from the GFC, is meant to be another reassurance to depositers that there's enough cash going around.
They are pledging to put US$30 billion (AU$45 billion) into First Republic.
Here's part of the statement from the likes of Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs and Morgan Stanley, among others:
Following the receiverships of Silicon Valley Bank and Signature Bank, there were outflows of uninsured deposits at a small number of banks. America’s financial system is among the best in the world, and America’s banks – large, midsize and community banks – do an extraordinary job serving the banking needs of their unique customers and communities.
The banking system has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this.
The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most.
So far, First Republic has gained 10%. So clearly investors are feeling a bit more optimistic.
Credit Suisse and SVB banking crises are 'not a repeat of 2008'
By Emilia Terzon
Rabobank's global strategist Michael Every is not renowned for his optimism, but he cannot see a looming re-run of the global financial crisis:
"This is not a repeat of 2008 for one clear reason, which is the banks are much better capitalised generally, and credit quality is not the same issue."
You can read more of Michael Every's take in this piece by my colleagues Nassim Khadem and Michael Janda.
Where we are sitting at 7:30am AEDT
By Emilia Terzon
- ASX 200 futures: +0.3% at 7,012 points
- Australian dollar: +0.6% at 66.54 US cents
- Dow Jones: +1.2% to 32,247 points
- S&P 500: +1.8% to 3,960 points
- Nasdaq: +2.5% to 11,717 points
- DAX: +1.6% to 14,967 points
- FTSE: +0.9% to 7,410 points
- Brent crude: +1.4% to $US74.70/barrel
- Spot gold: -0.4% at $US1,923.60/ounce
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Bitcoin: +2.5% to $24,963
