European markets are heading for a positive open Wednesday as global investors brace themselves for the U.S. Federal Reserve's latest monetary policy decision.
Goldman Sachs says investors haven't fully moved past March's bank crisis as banking stocks trade lower on Tuesday. The firm's analysts noted that following the failures of Silicon Valley Bank and Signature Bank in March, the market's worries were quickly alleviated by a deposit injection at First Republic Bank.
"Since bottoming out at 3808 on Mar. 13, the S&P 5000 gained almost 10% [as of] Monday night on the back of relaxed banks tensions, as well as a strong earnings season and a growing consensus that the Fed will soon pause its year-long rate hiking cycle," several Goldman analysts wrote in a Tuesday note.
"But today, we appear to be seeing some return of the March concerns following JPM's announced acquisition of FRC Monday. Regional bank stocks are down 4% to 13%. [Managing director Richard] Ramsden sees the JPM acquisition as accretive and points out that the transaction highlights that G-SIBs will be allowed to bid on FDIC transactions even if they are above the deposit cap," the note continued.
The former Boston Fed president, who retired from the board in September 2021, told CNBC on Tuesday that turmoil in the banking industry and an economic slowdown should push policymakers to end the rate-hiking campaign that began in March 2022. "My own view is that the economy is quite likely to slow down in the second half of the year and that it's not necessary at this point to be raising rates until we get a better view of what the second half of the year looks like," Rosengren said on "Traders in the futures market are pricing in a 96% chance that the Federal Open Market Committee approves a quarter percentage point rate hike when the two-day meeting ends, according to the CME Group's FedWatch tracker.
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