Participants are bracing for a potential downturn in Asian equities as turmoil in the banking sector looms large. First Republic Bank, deemed too small to survive, is on the verge of collapse, prompting the Federal Deposit Insurance Corporation to consider lowering its ratings and potentially limiting its access to Fed facilities. This could lead to negative contagion effects on companies and the broader banking sector that still have credit and liquidity exposure to the bank.
Meanwhile, geopolitical tensions remain high as US President Biden emphasizes the need for diplomacy with North Korea to bolster regional stability, while warning against any nuclear attack. The US nuclear ballistic submarine is set to visit South Korea for the first time in over 40 years as part of a new bilateral framework to counter Pyongyang.
Traders are also closely monitoring the Advanced reading of the US Q1 GDP and the Core Personal Consumption Expenditures Price Index ahead of the upcoming FOMC rate decision, where rates are expected to rise by 25 bps. With uncertainty looming over the banking sector, investors are closely anticipating the Fed’s next move on rates after May.
