First Republic down, big tech beats expectations

What’s happened?

WTI crude futures surged above $77 per barrel on Wednesday after a report from the American Petroleum Institute (API) showed a larger-than-expected drop in US crude inventories. The report indicated that inventories had fallen by over 6 million barrels in the previous week, compared to expectations for a decline of 1.7 million barrels. This news has boosted market confidence in the demand outlook for crude oil, particularly as major economies around the world are starting to recover from the pandemic.

Meanwhile, in the banking sector, First Republic saw its shares plummet by 49% due to a drop in deposits. As part of its restructuring plans, the bank reportedly plans to divest between $50 billion to $100 billion of long-dated mortgages and securities. The bank has also sought advice from consulting firm Messina Group on dealings with the government. In contrast, PacWest's shares surged by 14% after the bank reported that deposits had stabilized in March and rebounded in April.

What to watch?

On the economic front, Australia's annual inflation rate dropped to 7.0% in Q1 of 2023 from an over-30-year high of 7.8% in Q4. While this was still above market forecasts of 6.9%, it represents a significant improvement and the lowest print since Q2 2022. This could potentially ease pressure on the Reserve Bank of Australia to raise interest rates.

Finally, in the technology sector, Alphabet and Microsoft both reported impressive earnings, kicking off the Big Tech earnings season on a positive note. Alphabet's cloud unit turned a profit for the first time, and the company announced a share buyback of up to $70 billion. Meanwhile, Microsoft reported resilient demand for its Azure cloud services and emphasized the importance of artificial intelligence in its future growth strategy. These results underscore the continued dominance of Big Tech companies in the global economy.