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Wall Street drifts lower following JPMorgan's takeover of First Republic Bank


Wall Street finished slightly lower after JPMorgan Chase agreed to take over the First Republic bank, marking the third regional bank’s failure since early March. The deal ended recent bank turmoil at least temporarily ahead of the crucial Fed rate decision and Apple’s earnings this week. The US treasury yields jumped as markets priced in another 25 basis point rate hike by the reserve bank, sending the US dollar higher, pressing on commodity prices, including gold and oil. The Japanese Yen weakened significantly for the second straight trading day after the BOJ insisted on its ultra-loss monetary policy, taking the USD/JPY to the highest level since early March.

Cryptocurrency’s buying frenzy also took a breather as the First Republic Bank’s sale eased concerns over the banking system, causing a sharp retreat in the crypto markets, with Bitcoin falling 4.6% to under 28,000.  

On the economic front, the US manufacturing PMI contracted for the sixth consecutive month in April, the longest stretch since 2009. Notably, manufacturing prices, the cost of materials, jumped to the highest level since July due to a rebound in oil prices early, usually suggesting the cost will pass to consumers and keep inflation elevated.

Both China and European markets closed for the Labor Day holiday. The ASX 200 futures were slightly down 0.03%, and Nikkei 225 futures rose 0.62%.

Click to enlarge the table


Price movers:

  • 6 out of 11 sectors in the S&P 500 finished lower, with energy and consumer discretionary stocks leading losses, both down more than 1%, while the technology and defensive sectors outperformed. Healthcare stocks rose 0.59%, utilities were up 0.21%, and consumer staples climbed 0.09%.
  • JPMorgan’s shares jumped 3.2% amid First Republic Bank’s takeover. The largest US bank acquired all the fallen regional bank’s deposits and “substantial assets”. The bank gets $92 billion in deposits, including the $30 billion that was injected by the other big banks last month, while absorbing most of the losses on mortgages and commercial loans, which 
  • Meta Platforms Inc. is looking to raise $8.5 billion through bond offerings to help finance capex, share buybacks, acquisitions, and investment. The tech giant raised $10 billion through corporate bonds issued for the first time in its history last year.
  • USD/JPY soared 130 points, or 1%, to 137.50, the highest seen on 8 March after the Bank of Japan kept its ultra-loss monetary policy, a negative deposit rate, and 0.5% cap for its 10-year government bond yields. It was the first policy meeting that was hosted by the new BOJ governor Kazuo Ueda, who was widely considered to alter the central bank’s dovish stance.
  • Both gold and oil fell amid a jump in rates and the US dollar. However, the downbeat move in commodities could be swiftly reversed if the Fed provides a dovish outlook on its policy path later this week, which could be a catalyst for another rally in gold.
  • Cryptocurrencies’ correction may continue amid eased concerns in banks. Both Bitcoin and Ethereum may find their support around the 50-day moving average of 26,500 and 1,760, respectively.

ASX and NZX announcements/news:

  • ASX listed alcoholic drinks retailer reported sales revenue of A$2.83 billion in the third quarter, up 3.7% from a year ago. 

Today’s agenda:

  • RBA’s rate decision. The reserve bank is expected to pause rate hikes for the second consecutive time as inflation cooled to 7% in the first quarter. 
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