Stocks Bounce Back on Bailout News 

Following heavy selling across the start of the week, global asset prices were seen rebounding sharply yesterday in response to news that struggling First Republic Bank will receive emergency funding. A group of 11 US banks have pooled together to offer FRB $30 billion in deposits to help bolster its liquidity position and strengthen confidence in the bank, preventing the bank from suffering the same fate as SVB last week.

In a joint statement, the banks in question (including BoA, JPM, Goldman Sachs) note that regional banks “are critical to the health and functioning” of the financial system. FRB has seen a massive decline in stock price over the last week (falling around 70%) over liquidity fears on the back of the SVB collapse. With FRB deposits heavily invested, similar to SVB, the fear is that the bank won’t be able to cope with high-level client withdrawals and would need to realise losses on investment portfolios.  Additionally, with around 70% of FRB deposits uninsured, a collapse could have disastrous consequences for the broader financial system.

SNB Help Credit Suisse

This bank-to-bank bailout, as it's been called, comes on the back of US regulators over the weekend agreeing to backstop all SVB and Signature Bank deposits in a bid to help stabilise market concerns. Alongside the moves being made in the US, Credit Suisse this week agreed an emergency CHF50 billion in funding from the SNB after its stock price plunged to fresh record lows. Sentiment was rocked after the bank’s lead shareholder Saudi National Bank told reporters live on air that it wouldn’t be offering any further help in buying more shares.

ECB Reassures Markets 

At its latest rates meeting this week, the ECB also offered reassurance with ECB chief Lagarde telling markets that the bank stood ready to act as necessary to support the banking sector if needed. Furthermore, Lagarde explained conditions currently were not the same as they were in 2008, leading to the GFC, and said that the bank has the necessary tools to help prevent a crisis.

Technical Views

First Republic Bank

The chart clearly maps the severity of the sell off over the last fortnight. Shares tumbled from highs above 110 to lows of around 19 before stabilising. Momentum studies are turning higher off lows, offering some hope that price can build a base here to start to climb higher. However, with the market still well below any structural price levels, risks of a further downside break remain live.