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Stock Markets Rise, Led by Banks, Ahead of Fed Meeting


Stocks rose for a second day as recent financial rescue measures came to an end, even as the fate of some banks remained uncertain and Federal Reserve policymakers began An important meeting could end with them raising rates again.

The S&P 500 index rose nearly 1% on Tuesday, in line with markets in Europe and Asia, most of which rallied.

An index that tracks the biggest banks in Europe, which was caught up in turmoil after US regulators arrested two midsize lenders, Silicon Valley Bank and Signature Bank, rose 4 %. UBS, was patted on by Swiss regulators over the weekend Acquiring rival Credit Suisse9 percent increase.

Finance Minister Janet L. Yellen She expressed confidence in the nation’s banks on Tuesday and suggested the government would step in to protect smaller banks if needed, according to her prepared remarks.

Bank of the First Republic, the San Francisco lender that has been at the center of Wall Street’s concerns about the US banking system, rallied nearly 40% on Tuesday, a dizzying gain but only recovered nonetheless. part of the value of the shares is reduced in price. Shares of First Republic are still down about 90% this month, losing tens of billions of dollars in market value.

The bank entertained a number of potential buyers after $30 billion cash infusion from the country’s largest banks have failed to restore investor confidence. Analysts at Morningstar “struggling with why a buyer would be motivated to step in, except perhaps if it was driven by regulators,” they wrote in a new report. on the prospects of the First Republic.

A key question now for investors, especially those worried about the impact of higher interest rates on banks’ balance sheets, is what the Federal Reserve will do. When Policymakers meet this week. Some investors and economists believe the Fed may well choose not to raise rates, although a return to market calm this week has bolstered bets that Fed policymakers will raise interest rates by a quarter point when they announce their decision. Wednesday.

The debate shows how quickly the banking crisis changed opinion in the market. A few weeks ago, the question was whether the Fed would speed up rate hikes. Now, traders are betting on a series of rate cuts starting in the summer.

Economists have begun to warn that trouble in the financial system could weigh on the economy as a whole, if lenders start pulling out as they seek to shore up their finances.

“Recent events reinforce our belief that a recession remains the most likely outcome for the economy next year,” analysts at Deutsche Bank noted.

That’s not necessarily a bad thing for the market, as analysts at Bank of America have shown that the measure of investor pessimism has deepened in relation to the market’s low points in cycles. before. Alongside the recent rally in stocks, oil prices and government bond yields – two key gauges of concern about the economy – rose for a second session on Tuesday.

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