On Friday, Asian stock markets recovered by 1.7%, bouncing back from a 2.7% drop earlier in the week that had sent markets to their lowest levels in over three months.
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This recovery was largely driven by moves from large U.S. banks, who injected $30 billion in deposits into First Republic Bank in an effort to rescue the struggling lender, which had been caught up in the wider crisis triggered by the failure of two other mid-size U.S. banks in the past week.
Meanwhile, the European Central Bank announced that it would be raising interest rates by 50 basis points, in spite of calls from some investors to hold back on policy tightening until the turmoil in the banking sector had eased. While this move was in line with previous suggestions from policymakers that significant rate hikes were necessary, there was some surprise at the timing of the announcement, which came amidst ongoing uncertainty and volatility in the markets.
Looking ahead, there are tentative signs that the worst of the banking crisis may be over. However, investors remain cautious and will be watching closely for further developments in the coming days and weeks. In the meantime, the release of final CPI data for the eurozone on Friday will be a key point of interest in an otherwise thin calendar for economic data releases.
Overall, the past week has been a stark reminder of the fragility of global financial markets, and the potential for even small events to trigger widespread instability. However, it has also shown the resilience of investors and the capacity of policymakers to respond to crisis situations. As we move forward, it will be important to remain vigilant and to continue working towards a more stable and secure financial system that can weather even the toughest challenges.