Rebound in banks lift the S&P500: EV sector gets a boost by EU's plans

Rebound in banks lift the S&P500: EV sector gets a boost by EU’s plans

Stocks rose Wednesday as investors hoped congressional leaders and President Joe Biden could come to a deal on the US debt ceiling and avoid a catastrophic default.

At the conclusion of a meeting between the president and congressional leaders Tuesday, House Speaker Kevin McCarthy said that a “better process” is now in place for further talks, saying it’s “possible to get a deal by the end of the week.” The White House said that Biden cancelled a second leg of an upcoming international trip to focus on the negotiations.

Treasury Secretary Janet Yellen has said the government needs to raise the limit immediately as the country faces the possibility of defaulting as early as June 1.

Concerns over a potential default have weighed on markets recently. The Dow is down about 2 per cent this month, including a 1 per cent decline on Tuesday.

However, overnight, the Dow Jones Industrial Average traded 408.63 points higher, or 1.24 per cent, to 33,420.77. The S&P 500 gained 1.19 per cent to 4,158.77. The Nasdaq Composite advanced 1.28 per cent to 12,500.57.

Regional bank shares rebounded on Wednesday, helping market sentiment.

Shares of US regional banks rallied after Western Alliance Bancorp said deposits had grown by more than $2 billion since the quarter’s end, easing worries about the health of US regional lenders.

The KBW Regional Banking Index soared by 7.3 per cent for its best day since January 2021.

Western Alliance rose 10 per cent, while PacWest Bancorp jumped by 22 per cent. The sector had been under pressure since March, when a series of firms including Silicon Valley Bank collapsed.
National Western Life Group soared by over 45 per cent overnight, after announcing a strategic alternatives review and formed an independent committee to oversee the process.

In commodity news, the European Union aims to reduce its dependence on China and other countries for critical materials by 2030, but this can only be achieved through increased financing and faster permitting. The EU has set targets for mining 10 per cent of its annual needs, recycling 15 per cent, and processing 40 per cent of critical materials within Europe.

Morgan Stanley's Global Director of Research predicts that a massive $7 trillion investment will be required by 2040 to overhaul the EV battery supply chain in a multipolar world. This transition demands significant policy coordination and investment to accelerate the shift towards electric vehicles, secure key raw materials, and develop supply chains and infrastructure. The dominance of China in the global EV battery supply chain highlights the urgency for the West to invest and create a new supply chain to meet decarbonization goals and address national security concerns.

Fortescue Metals Group's new CEO, Fiona Hick, is considering acquisitions in the critical minerals sector, indicating a potential strategy shift for the iron ore giant. The company aims to diversify into green metals like lithium and supply battery minerals to its clean energy-focused division. Hick emphasises financial viability and cost control in potential acquisitions.

Overall, most US sectors closed higher overnight. Financials, Energy and Consumer Discretionary all closed over 2 per cent higher, whilst utilities was the worst performer.

Futures

The SPI futures are pointing to a 0.6 per cent gain.

Currency

One Australian dollar at 7:10 AM is buying 66.63 US cents.

Commodities

Iron ore futures are pointing to a 2.04 per cent gain.

Gold dropped 0.41 per cent. Silver was flat. Copper gained 2.39 per cent and oil jumped 2.78 per cent.

Figures around the globe

Across the Atlantic, European markets closed mixed. London’s FTSE fell 0.36 per cent, Frankfurt added 0.34 per cent while Paris closed 0.09 per cent lower.

In Asian markets, Tokyo’s Nikkei gained 0.84 per cent, Hong Kong’s Hang Seng fell 2.09 per cent while China’s Shanghai Composite closed 0.21 per cent lower.

Yesterday, the Australian sharemarket closed 0.49 per cent lower at 7199.

Ex-dividends

Virgin Money Uk PLC (ASX:VUK) is paying 6.2088 cents unfranked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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