Little by little, and with the utmost caution, investors are trying to recover everything they lost last week with the banking chaos unleashed on both sides of the Atlantic. The Ibex-35, which lost 6% in those heart-stopping days, recovered 1.3% yesterday and faces Tuesday’s session with increases of more than 1% to 8,934 points.
The European Central Bank (ECB) has been in charge of restoring some stability to the market, by repeating over and over again the message of support for “resilient” and well-capitalized banks in the euro zone. But the doubts left by the Credit Suisse bailout and the moves in the US to save another entity in trouble, the First Republic Bank, continue to be very present in investors’ minds.
The climate of tension due to financial alerts means that each word, each statement and each decision can make the Stock Market go up or down in a matter of seconds. Against this backdrop, the Federal Reserve (Fed) arrives this Tuesday at one of its most important meetings in recent times.
It will not be until this Wednesday when his decision on interest rates is known. And analysts are more divided than ever between those who think that the agency will maintain its plans to raise the rate by 25 basis points to curb inflation (half what was expected before the outbreak of the crisis), and those who believe that it will take the brake on banking turbulence in the country.
An earthquake that has already caused regional entities in trouble to pressure the Treasury and the Fed for the creation of a new guarantee fund to cover absolutely all deposits -even those above the current limit of $250,000- during a fixed period, in principle in two years.
The latest episode of banking tension in the country comes, once again, from the First Republic Bank. After receiving a lifeline last week of 30,000 million dollars (about 28,000 million euros) from eleven large banks led by JP Morgan, City and Wells Fargo, among others, the entity has once again sunk on the stock market (close to a 50% from injection). And it is that investors do not trust and the rating agencies have pulled the scissors -again late, according to analysts- cutting the bank’s credit rating piece by piece.
So now it is speculated that the CEO of JP Morgan, Jamie Dimon, has started talks with other Wall Street entities to ‘improve’ the bailout option through a capital increase.