Global stock markets jump on easing bank fears, Alibaba split

Stock markets advanced on Wednesday as fears of a banking crisis fade further in investors’ rearview mirror while Chinese tech giant Alibaba’s breakup plans boosted most Asian shares.

Measures taken by authorities to prevent a new global financial crisis appear to have calmed the markets following the failures of three US lenders and emergency sale of European banking giant Credit Suisse.

“With banking worries put on the back burner for now, with no further stresses in the system emerging, investors’ appetite for a bit more risk is returning,” noted Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Wall Street opened higher while European markets were up in the afternoon and Asia finished broadly in the green.

Shares in Switzerland’s biggest bank, UBS, jumped after it announced that former CEO Sergio Ermotti would return to lead its controversial takeover of troubled domestic rival Credit Suisse.

Ermotti, who was CEO from 2011 to 2020, is credited with restoring UBS’ reputation following its bailout after the 2008 global financial crisis.

UBS chairman Colm Kelleher said the mega-merger carries a “huge amount of risk” but Ermotti said his return was a “call of duty”.

In Britain, the Bank of England sought to further ease concerns about any risk of contagion from the recent turmoil in the financial system.

UK banks remain “resilient” and largely unaffected by the sector’s upheaval in Switzerland and the United States, the central bank’s Financial Policy Committee insisted.

“UK banks are not exposed to material direct losses associated with the failure of (US bank) SVB and takeover of Credit Suisse, and they have very limited direct exposure to regional US banks,” it added.

Fawad Razaqzada, analyst at City Index and Forex.com, said “investor sentiment remained supported as the turmoil surrounding the global banking sector appears to be contained”.

“On top of this, Alibaba buoyed sentiment in the tech sector after deciding to split into six business units,” he added.

Hong Kong-listed Alibaba closed up more than 12 percent after announcing that it would split its $220 billion empire into six groups.

The Hangzhou-based firm said the changes were intended to “unlock shareholder value and foster market competitiveness”.

Alibaba is one of China’s most prominent tech firms, with operations spanning cloud computing, e-commerce, logistics, media and entertainment, and artificial intelligence.

The internet giant has faced unprecedented headwinds in recent years as Beijing has imposed tighter restrictions on the domestic tech industry.

Razaqzada said Wednesday’s gains in the stock markets may also be due to “some bargain hunting for some downbeat stocks, which is an additional reason behind the firmer indices”.

Oil rose for a third-straight session on Wednesday as a halt to some exports from Iraqi Kurdistan raised concerns of tightening supply, and as easing fears of a global banking crisis supported risk sentiment in the wider markets.

Crude exports of 450,000 barrels per day (bpd) from Iraq’s semi-autonomous northern Kurdistan region were halted on Saturday following an arbitration decision that confirmed Baghdad’s consent was needed to ship the oil.

Brent crude was up 72 cents, or 0.9%, to $79.37 a barrel at 1330 GMT, while West Texas Intermediate U.S. crude increased 77 cents, or 1.1%, to $73.97.

“The longer the stoppage continues, the tighter the supply outlook will become,” said Stephen Brennock of oil broker PVM.

On Wednesday, Norwegian oil firm DNO said it had begun shutting down production at its fields in Kurdistan. The company’s Tawke and Peshkabir fields averaged output of 107,000 bpd in 2022, a quarter of total Kurdish exports.

“Supply concerns will continue to support oil prices while the dispute continues,” said Fiona Cincotta, senior financial markets analyst at City Index.

Also helping sentiment were easing worries over the banking sector after weeks of volatility in the market that had sent oil to a 15-month low on March 20, with investor nerves soothed by the sale of assets in collapsed lender Silicon Valley Bank.

“The recent rebound in oil prices is mainly driven by sentiment. We can see that risk sentiment has recovered to some extent, which pushed (the) global stock markets and crude oil rebound,” said CMC Markets analyst Leon Li.

Oil also gained support from a drop in U.S. crude inventories. According to market sources citing American Petroleum Institute figures on Tuesday, crude stocks fell by 6.1 million barrels.

Attention will focus on official US inventory data from the Energy Information Administration at 1430 GMT to see if it confirms the crude stock decline. The German parliament on Wednesday approved defence ministry plans to buy up to 28 self-propelled howitzers to replace weapons rushed to Ukraine out of army Stocks last year, lawmakers familiar with the matter told Reuters.

Agence France-Presse