Despite encouraging Q4, investors still chary of next direction

Tokyo: Shares advanced Monday in Tokyo and Sydney, while most world markets were closed for May 1 holiday. Traditional Labour Day holidays around the globe limited initial global market reactions to the Federal Deposit Insurance Corp’s announcement that regulators had seized troubled First Republic Bank and will sell its assets to JPMorgan Chase Bank.

San Francisco-based First Republic was viewed as the likely weakest link, in an industry strained by surging interest rates, due to its high amount of uninsured deposits and exposure to low interest rates. It would be the third midsize lender to fail in two months after the failure of Silicon Valley Bank in early March. The bank’s stock closed at $3.51 on Friday, a fraction of the roughly $170 a share it traded for a year ago.

In Asian trading Monday, Tokyo’s Nikkei 225 index added 0.9 per cent to 29,123.18 and the S and P/ASX 200 in Sydney advanced 0.5 per cent to 7,344.20. Other markets in the region were closed. The futures for the S&P-500 and the Dow industrials edged less than 0.1 per cent higher. On Friday, the S&P-500 gained 0.8 per cent, clinching a second straight winning month.

The Dow Jones Industrial Average climbed 0.8per cent and the Nasdaq composite gained 0.7 per cent to 12,226.58. Exxon Mobil did some of the market’s heavier lifting after it rose 1.3 per cent. It reported stronger profit and revenue for the latest quarter than forecast. Most companies so far this reporting season have beaten expectations, though they were modest given forecasts that the economy may tip into recession as it slows under the weight of higher interest rates meant to get inflation under control.

Based on recent economic reports, traders are betting the Federal Reserve will raise interest rates again at a meeting next week and possibly again in June. A report on Friday said the inflation measure that the Fed prefers to use came in close to expectations for March, but is well above the target. Also, wages rose more during the first three months of the year than economists expected, potentially keeping inflation more entrenched.

The Fed has raised its key overnight interest rate to its highest level since 2007, up from its record low, following a barrage of hikes since early last year. Together, they've already slowed the economy's growth down to an estimated 1.1 per cent annual rate at the start of this year. They've also caused cracks in the banking system. The Federal Reserve released a report Friday blaming the failure of Silicon Valley Bank on a combination of poor bank management, weakened regulations and lax government supervision. In other trading Monday, US benchmark crude oil gave up 94 cents to $75.84 per barrel in electronic trading on the New York Mercantile Exchange. It gained $2.02 on Friday. Brent crude, the standard for pricing for international trading, shed 88 cents to $79.45 per barrel. The US dollar rose to 136.76 Japanese yen from 136.24 yen. The euro weakened to $1.0999 from $1.0023.