Asia markets cautiously optimistic as banking sector worries ease

March 30, 2023 (MLN): Asian markets were mixed as Hong Kong dipped, while Tokyo, Shanghai, Singapore, Manila, and Jakarta were also lower. On the other hand, Sydney, Seoul, Taipei, and Wellington rose due to banking sector concerns ease and investors weighing the central banks' interest rate plans, as APP reported. 

Investors have taken heart from reassurances by authorities around the world that the fallout from the collapse of US regional banks and the takeover of Credit Suisse was contained.

However, the flare-up has also fanned speculation that the Federal Reserve will have to end its inflation-fighting rate hike campaign sooner than expected to avoid further destabilizing the finance industry.

Some analysts even predict officials cutting borrowing costs by the end of the year, with some forecasts putting the rate at just above four percent by 2024, compared with more than five prior to the recent upheaval.

This has focused eyes on the Fed's next policy meeting, with observers predicting that could mark the last increase, even though inflation is still much higher than its target.

"The Fed remains in a very difficult position," said Wolfe Research's Chris Senyek. "With banks stabilizing, inflation still way above target, the labor market still historically strong, and the Fed desperately needing to rebuild credibility, our sense is that the (policy board) will hike by 25 basis points on May 3."

There is a feeling the latest woes among banks, which have been blamed on recent sharp hikes in rates, will force them to tighten credit, reducing the need for the Fed to hike further.

"The good news for stocks is that growth concerns have moved into the driver's seat after the recent banking shock, where investors are now positioning for the Fed to cut and instead rely on credit tightening to tame inflation," said SPI Asset Management's Stephen Innes.

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