Morning Brief – New liquidity pumps markets

Market traded higher during the Asian session, following the news that larger US banks agreed to deposit $30bn in San Francisco-based First Republic Bank as a sign of confidence in the banking system during Thursday’s US session.

The stock moved higher across Asia, while the US dollar tumbled broadly as markets came to terms with the massive new liquidity injection this week, a form of QE light. As one would expect the price of gold and silver also rose.

The statement that Bank of America, Wells Fargo, Citigroup, and JP Morgan will deposit approximately $20bn, while Goldman Sachs and Morgan Stanley will deposit another $5bn, and Truist, PNC, US Bancorp, State Street, and Bank of New York Mellon will deposit around $1bn each pumped risk-on assets.

Treasury Secretary Janet Yellen told the Senate Finance Committee that the US banking system remains sound and Americans can feel confident that their deposits will be there when needed.

Also, Yellen said “decisive and forceful” actions taken this week by the US government to shore up public confidence in the banking system after the collapse of Silicon Valley Bank underscored its resolve to protect depositors.

Credit Suisse also saw its shares jump by more than 30 per cent as trading opened in Zurich on Thursday after turning to the central bank in a bid to temper fears over its finances.

In response to the move Fitch ratings agency said “our base case is that recent developments in the US will not cause major shifts in US monetary policy”

The agency also added “APAC banks resilient to risks highlighted by us bank failures” and “Generally view securities portfolio valuation risks as manageable for APAC banks, although exposures tend to be greatest in India and Japan.”

The data front was very quiet during the Asian session, expect more risk-on move as the liquidity injection should provoke another green day on Wall Street.