# Global shares jump but bank ‘whack-a-mole’ not over Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-21 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Global Shares Jump After Credit Suisse Rescue Meta Description: Investors upbeat as Fed meeting kicks off, uncertainty lingers over rate hike decision. Market tension pushes gold to $2,000 per ounce. URL: https://financedigest.com/global-shares-jump-but-bank-whack-a-mole-not-overhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-21t013819z1lynxmpej2k00wrtroptp4global-markets-asia-open-1736814286963-compressed.jpg) By Koh Gui Qing NEW YORK (Reuters) – Global shares jumped on Tuesday after the rescue of Credit Suisse stemmed a rout in equities and whetted risk appetites, although financial system uncertainties limited buying as investors awaited the outcome of a key Federal Reserve meeting. The Fed began a two-day meeting earlier on Tuesday and, after a wild few sessions, investors are divided about whether the central bank will raise interest rates by 25 basis points on Wednesday, or skip a chance at raising borrowing costs this month. We expect a 25-basis-point [rate hike,”](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") economists at TD Securities said in a note. “Post-meeting communication is likely to emphasize that the Fed is not done yet in terms of tightening, with officials also flagging the more uncertain economic environment.” By early afternoon in New York, the Dow Jones Industrial Average rose 0.45%, the S&P 500 jumped 0.61%, and the Nasdaq Composite Index gained 0.73%. [Shares of First Republic Bank](https://www.financedigest.com/bank-shares-rise-after-credit-suisse-rescue-eases-crisis.html "Bank shares rise after Credit Suisse rescue eases crisis"), a top concern of U.S. investors, surged 41.8% on news that JPMorgan CEO Jamie Dimon is leading talks with other [big banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") on new steps to stabilise it, including through a possible investment. Many investors had thought concerns about [banking sector stability were a thing of the past after the 2008 crisis](https://www.financedigest.com/how-the-2023-banking-crisis-unfolded.html "How the 2023 banking crisis unfolded"). But the collapse of two U.S. regional banks, plus the eleventh-hour rescue of [Credit Suisse](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse billion lifeline offers limited respite to global banks"), are forcing central bankers to prioritise fighting inflation alongside keeping money flowing through the financial system. The jury is out on whether the [Bank of England](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure") will hold fire when it meets this week, and the picture is not much clearer for the European Central Bank, which raised rates last week but left traders without much idea of what to expect next. It seems the penny is dropping, most central [banks hiked](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire") interest rates too late and then raised rates too fast. And now the world is reeling with a banking [crisis,”](https://www.financedigest.com/oil-rises-on-demand-hopes-as-banking-crisis-fears-subside.html "Oil rises on demand hopes as banking crisis fears subside") Saxo Bank strategist Jessica Amir said. European [banking stocks](https://www.financedigest.com/asian-stocks-rally-as-bank-jitters-calm-alibaba-lifts-mood.html "Asian stocks rally as bank jitters calm, Alibaba lifts mood") , which seem headed for their biggest monthly slide in three years, rose by 3.9% on Tuesday, helping lift the regional STOXX 600 index by 1.4%. Analysts said the Swiss government-backed takeover of [Credit Suisse by UBS helped soothe concerns over European financial stability, even though a wipeout of some Credit Suisse bondholders has sent shockwaves through bank](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?") debt markets. In a nod to [concerns that banks](https://www.financedigest.com/u-s-bank-executives-raise-concerns-over-inflation.html "U.S. bank executives raise concerns over inflation") may not be out of the woods, U.S. Treasury Secretary Jane Yellen said on Tuesday that further U.S. government intervention is possible if another smaller [bank experiences](https://www.financedigest.com/transforming-the-banking-experience-to-be-mobile-first-and-people-centric.html "Transforming the banking experience to be mobile-first and people-centric") difficulties similar to those of other recently failed lenders. Indeed, Bloomberg News reported on Monday that U.S officials are looking at ways to temporarily expand Federal Deposit [Insurance Corp coverage](https://www.financedigest.com/types-of-insurance-coverage.html "Types of insurance coverage") to all deposits. While [global regulators](https://www.financedigest.com/global-stock-markets-slip-on-inflation-tax-regulation-worries.html "Global stock markets slip on inflation, tax, regulation worries") are acting with pace, this appears to be a game of ‘whack-a-mole,'” bank analyst Jonathan Mott at Barrenjoey in Sydney said. Aided by market tension, gold has shot up to around $2,000 an ounce this week for the first [time in a year](https://www.financedigest.com/30-years-of-excel-lence-time-to-move-on.html "30 YEARS OF EXCEL-LENCE: TIME TO MOVE ON?"). Spot gold [prices took a breather](https://www.financedigest.com/oil-prices-take-a-breather-opec-sticks-to-output-plans.html "Oil prices take a breather, OPEC+ sticks to output plans") on Tuesday and were down 1.92% at $1,941.6 an ounce. ADDITIONAL TEARS At the heart of Monday’s steep drop in [banking shares was the $17 billion](https://www.financedigest.com/20-billion-in-bank-service-fees-are-you-overpaying.html " Billion in Bank Service Fees: Are You Overpaying?") write-down in Credit Suisse’s “additional tier 1” debt – part of its capital buffers – to zero. Bondholders usually outrank shareholders in the event of a restructuring or bankruptcy. But [Credit Suisse AT1](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") owners ended up empty-handed, which unleashed a wave of selling in this kind of debt in the European market. Regulators in Europe and Britain stepped in to reassure investors that it would not set a precedent, and prices stabilised on Tuesday, when it became apparent that the [Credit Suisse write-down was more a function of Swiss](https://www.financedigest.com/swiss-franc-grapples-with-safe-haven-identity-crisis-after-credit-suisse.html "Swiss franc grapples with safe-haven identity crisis after Credit Suisse") rules. With the focus on the outlook for monetary policy, the [dollar index edged](https://www.financedigest.com/dollar-edges-down-from-six-week-peak-swedish-crown-jumps.html "Dollar edges down from six-week peak, Swedish crown jumps") lower to 103.21 against a basket of currencies around its lowest since Feb. 14, as [investors grew confident enough to dip into other assets](https://www.financedigest.com/4-ways-todays-investor-can-future-proof-their-assets.html "4 Ways Today’s Investor Can Future Proof their Assets"). Fed funds futures imply about a 1-in-4 chance of the Fed pausing on Wednesday, according to CME’s FedWatch tool, while markets are divided evenly on the prospect of a hike in Britain when the [Bank of England](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") meets on Thursday. The [banking sector’s near-death experience](https://www.financedigest.com/the-rise-of-virtual-agents-the-future-banking-experience.html "The rise of virtual agents: the future banking experience") over the last two weeks is likely to make Fed officials more measured in their stance on the pace of hikes,” said Steve Englander, Standard Chartered’s head of G10 FX research. The [dollar rose 0.71% against the Japanese yen to 132.28 and lost out to the euro](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters"), which rose 0.45% to $1.07705. (Additional [reporting by Iain Withers in London](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps") and Tom Westbrook in Singapore; Editing by Jacqueline Wong, Mark Potter, Susan Fenton, Andrea Ricci and Richard Chang) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---