First Republic Bank Crisis Raises Concerns About Stability of US Banking System

On Monday, all three key benchmark indices of the US stock market ended lower as market participants reacted to JP Morgan Chase & Co’s takeover of the troubled First Republic Bank. First Republic Bank’s share price crashed to the tune of 46% on the first trade session of the week, raising concerns about the stability of the US banking system. Dow Jones went off 0.14%, S&P 500 index went down 0.04%, whereas Nasdaq corrected 0.11% on Monday deals.

The looming economic slowdown concerns due to bank crisis in the US as Treasury Secretary Janet Yellen warned that the United States could run out of cash and default on its debt repayments as early as June 1, should the government fail to raise the debt limit, added to the cautious sentiment.

Ruslan Lienkha, Chief of Markets at YouHodler, a Swiss-based international fintech platform, stated that while the collapse of First Republic Bank doesn’t directly impact the global economy, it raises concerns about the stability of the US banking system, and a potential bankruptcy of the bank could trigger a broader financial crisis in the country, affecting the real estate market and many other related industries, which could have massive implications for the world economy.

In early morning deals on Tuesday, Asian stock market opened mixed, with Japanese Nikkei fluctuating in between the green and red territory, Shanghai index trading sideways, Hong Kong’s Hang Seng up 1.58%, and South Korean KOSPI up 0.77%. SGX Nifty today opened lower, signaling a weak opening on Dalal Street, and continued to trade weak in a tight 45 points range.

After logging gains on Monday, the US dollar witnessed some profit-taking during the early morning session on Tuesday. The Dollar Index shed 0.09% to 101.785 levels.

In early morning trade in Asian stock market, WTI crude oil price slipped 0.18% to $75.60 per barrel, whereas Brent crude oil price is quoting $79.24 per barrel.

Anuj Gupta of IIFL Securities stated that for the week ahead, crude oil price has immediate support at ₹6050 and then ₹5800 levels on MCX while resistance at ₹6400 levels and then ₹6700 levels. The trend of crude oil is weak, and they are recommending sell on higher levels in crude oil prices. Brent crude oil price is trading around $80 per barrel, and they are expecting it may test $75 to $73 levels very soon.

In the early morning session, the US 10-year bond yield corrected 0.65% and hit 3.551 levels, whereas the US 30-year bond yield corrected 0.49% to 3.798 levels.

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