SINGAPORE – Global stock markets moved in opposite directions on Wednesday, as European investors responded to strain in the US banking sector but Wall Street futures rose on bullish updates from Microsoft and Google parent Alphabet.
Europe’s STOXX 600 share index fell 0.9 percent, as regional banking stocks dropped 1.7 percent.
MSCI’s broad index of global stocks was steady, as Asian markets outside of Japan ticked higher in line with rising Wall Street futures.
Shares in troubled San Francisco-based lender First Republic Bank hit a record low on Tuesday as it disclosed a $100 billion plunge in deposits, reviving fears over smaller US banks that began with Silicon Valley Bank’s collapse in March.
But ahead of quarterly results from Facebook parent Meta Platforms later in the day, Nasdaq futures were up 1.2 percent on Wednesday morning in Europe and S&P 500 futures gained 0.3 percent.
Microsoft’s Frankfurt-listed shares rose 7.4 percent after its quarterly results, issued after the US stock market closed on Tuesday, beat analysts’ forecasts. A $70 billion share buyback announced by Google parent Alphabet also looked set to insulate the mood on Wall Street from banking sector troubles.
US and European financial conditions have tightened significantly since the Federal Reserve and European Central Bank embarked on their most aggressive interest rate-hiking cycles for decades last year to battle inflation.
This has dented confidence towards loan-dependent sectors such as real estate, and raised questions over how global banks will deal with defaults.
Deposit flight from US banks has prompted investors to dial down profit expectations for the global banking sector, with banks under pressure to raise interest rates on savings accounts to keep hold of customers’ money.
“Banks around the world want to make sure their deposits will stay,” said Jason Da Silva, director of global investment strategy at Arbuthnot Latham in London.
“So there’s an expectation in the market that banks’ earnings and net interest margins have probably peaked.” – Reuters
