Asian equities rise on positive sentiment as FDIC may increase assessment on large US lenders

Positive sentiment in Asian equities, potential FDIC assessment on large US lenders, and Disney's restructuring are the highlights of the day.

By Ahmed Azzam | @3zzamous | 30 March 2023

  • Asian equities rise due to positive news surrounding China's tech sector, potential pause in interest rate hikes, and reduced concerns over recent banking turmoil.

  • FDIC reportedly considers asking the largest US lenders to bear a more significant proportion of recent bank failures' cost, planning a special assessment in May to bolster the deposit insurance fund.

  • Disney undergoes significant restructuring, with more than 300 job cuts in China.

  • Today's data could reveal cooling price growth in some pockets of the euro area due to base effects from energy costs, while jobless claims are projected to rise slightly.

What’s happened in the markets?

Most Asian equities rose on Thursday as positive news surrounding China's technology sector, expectations of a potential pause in interest rate hikes by major central banks, and a reduction in concerns over recent banking turmoil boosted global risk sentiment. While Japanese stocks eased, shares in Australia, South Korea, Hong Kong, and mainland China advanced in line with the positive trend on Wall Street.

The USDCAD dropped to a four-week low of 1.3553 as policymakers left the target for its overnight rate unchanged at 4.5% in March, as widely predicted, and pledged to maintain it at its current level provided that economic conditions remain broadly in line with expectations. However, investors continued to express concerns about the recent stress in the US financial system, which could result in a credit crunch and have an adverse impact on the growth outlook.

What to watch?

The Federal Deposit Insurance Corporation (FDIC) is reportedly considering asking the largest US lenders to bear a more significant proportion of the $23 billion cost of recent bank failures. The FDIC plans to impose a special assessment on the industry in May to bolster the deposit insurance fund, which is currently at $128 billion, and intends to reduce the burden on community banks. Meanwhile, Swiss regulators have encouraged UBS to rehire Sergio Ermotti as CEO to facilitate a smooth integration with Credit Suisse.

Fuel demand continues to lag, outweighing any disruption to shipments from Turkey, leading to a slip in oil prices. The Dallas Fed's survey of shale executives shows that they now anticipate WTI to reach $80 by year-end due to a banking crisis that has dampened output growth. Copper and other base metals also declined.

Disney is undergoing a significant restructuring that will result in more than 300 job cuts in China, while ABC News is reportedly letting go of 50 employees.

Today's data could reveal that price growth is cooling significantly in some pockets of the euro area due to base effects from energy costs. Germany's HICP inflation rate is expected to slow to 7.5% from 9.3%, while Spain's gauge is projected to decelerate to 3.7% from 6%. Excluding energy, upward price pressure is expected to persist, with Bloomberg Economics forecasting that Germany's core inflation rate will rise to a new historical high of 5.5% year on year.

Although jobless claims are projected to rise slightly to 195,000, they are expected to remain below 200,000 for the 10th time in the past 11 readings. Bloomberg Economics anticipates further increases in the coming months as job cuts announced earlier this year become effective. The third print of fourth-quarter GDP growth is projected to remain unchanged at 2.7%.