Aurelia Butler

NEW YORK (Reuters) – U.S. federal and state officials are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, a source familiar with the matter said on Thursday, as the White House vowed to monitor “short-selling pressures on healthy banks.”Shares of regional banks resumed their slide this week after the collapse of First Republic Bank (OTC:FRCB), the third U.S. mid-sized lender to fail in two months. Short sellers raked in $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to analytics firm Ortex.Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.”State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities,” the source said.White House press secretary Karine Jean-Pierre said the Biden administration was closely watching on the situation.”The administration is going to closely monitor the market developments, including the short-selling pressures on healthy banks. I would have to refer you to the SEC on any possible actions,” Jean-Pierre told a White House briefing.U.S. Securities and Exchange Commission Chair Gary Gensler on Thursday said the agency would go after any form of misconduct that might threaten investors or markets.”As I’ve said, in times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly,” he said in a written statement.Consumer Bankers Association President and CEO Lindsey Johnson stressed the banking industry remained strong and urged policymakers to call out “unethical behavior by activist investors” who were taking advantage of market volatility.”This volatility is being fueled by emotion and misinformation that does not reflect the strong underlying fundamentals of our banks,” Johnson said in a statement.”These institutions remain resilient and well-capitalized, and Americans can rest assured their deposits are safe.”The S&P 600 bank index dropped over 3% on Thursday. PacWest Bancorp shares tumbled over 50% after it confirmed it was exploring strategic options. Western Alliance (NYSE:WAL) Bancorp denied a report from the Financial Times that said it was exploring a potential sale, and said it was exploring legal options. Its shares plummeted more than 38%, with trading in the stock halted multiple times.Share price swings did not reflect the fact that many regional banks outperformed on first quarter earnings and had sound fundamentals, including stable deposits, sufficient capital, and decreased uninsured deposits, the source said.”This week we have seen that regional banks remain well- capitalized,” the source said.Short selling, in which investors sell borrowed securities and aim to buy these back at a lower price to pocket the difference, is not illegal and considered part of a healthy market. But manipulating stock prices, which the SEC has defined as the ‘intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting” stock prices, is. The increased short-selling activity has triggered some calls for a temporary ban, but an SEC official told Reuters on Wednesday the agency was “not currently contemplating” such a move.The SEC first warned investors in March, during a previous period of high market volatility surrounding the collapse of Silicon Valley Bank and Signature Bank (OTC:SBNY), that it was carefully monitoring market stability and would prosecute any form of misconduct. More

(Reuters) -Cryptocurrency exchange Coinbase (NASDAQ:COIN) Global Inc posted a smaller-than-feared loss in the first quarter, benefiting from cost cuts and diversification of revenue sources, sending its shares up 7% in extended trading on Thursday.The company has benefited from its deal for One River Digital Asset Management to ramp up product offerings in subscription and services revenue, while it also launched wallet-as-a-service and other products to scale blockchain. “We’re also seeing the benefits of increased cost efficiencies, and we’ve taken deep lessons from growing too quickly and believe that we are going to be prudent in our spend going forward,” Chief Financial Officer Alesia Haas said.Coinbase posted a loss of 34 cents a share, while analysts estimated a loss of $1.35 as investors tiptoe back to the speculative asset class to hedge against elevated market risks after a brutal selloff last year. But the trend is yet to power gains for the cryptocurrency exchange as trading volumes more than halved to $145 million while retail trading volumes, which had been instrumental in making Coinbase a household name in 2021, sank 72%. Earlier this year, the company said it will cut 950 more jobs in its the third round of layoffs since last year. Haas said the improved cost-structure will help the company hit its 2023 goal to improve core profit year-over-year. The company lowered operating expenses by 24% from last quarter and reported $607 million in expenses, much lower than its prior range of between $625 million and $675 million. “Everyone was expecting disastrous results, and it does not look to be a disaster for Coinbase at all,”  said Dave Weisberger, CEO of CoinRoutes, an algorithmic-trading platform for the digital asset industry. Coinbase shares, which lost 85% of their value in 2022, have risen nearly 40% this year as of Thursday’s close as cryptocurrencies gain some ground. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.A sea of red on Wall Street and renewed turmoil across the U.S. regional banking sector on Thursday suggest Asian markets go into Friday’s session on the defensive, bringing what has been a surprisingly resilient week for local stocks to a rocky end.On the regional economic data calendar, investors are braced for first quarter GDP from Indonesia, April inflation figures from the Philippines and Taiwan, and China’s services sector purchasing managers index, also for April. (Graphic: China services PMIs – https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqaroepw/ChinaPMI.jpg) As world markets digested the 25 basis point rate hikes from the Fed and European Central Bank – and notably divergent messaging from Fed Chair Jerome Powell and European Central Bank President Christine Lagarde – U.S. bank fears intensified.PacWest shares plunged 50%, the regional bank index fell for a fourth straight day, and Canada’s Toronto-Dominion Bank Group called off its $13.4 billion acquisition of First Horizon (NYSE:FHN) Corp, triggering a 33% slump decline in the U.S. bank’s shares.Reuters exclusively reported that U.S. federal and state officials are assessing the possibility of “market manipulation” behind the recent big moves in bank shares, as the White House vowed to monitor “short-selling pressures on healthy banks.”An investor going long mega U.S. tech shares and short regional banks on January 1 would be doing well today. Even better, following Apple (NASDAQ:AAPL)’s quarterly earnings beat after the bell on Thursday. (Graphic: Mega tech vs U.S. regional banks – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwyrgnovw/TechBankIndex.png) In some ways, the global fallout is clear and obvious – the Japanese yen rose for a third day, another indication that it may be rediscovering its safe-haven mojo, bind yields slumped, and gold surged to a three-year high and a whisker away from a new all-time high. Yet Asian markets, stocks at least, have been fairly unruffled. The MSCI Asia-ex Japan index on Thursday had its best day since late March and is flat on the week, supported by the lower dollar and bond yields, and growing hopes that the Fed’s hiking cycle is over.The Hong Kong tech index has outperformed the Nasdaq this week, although it is still on course for its fifth weekly fall in a row, its worst run since September last year. If Asian markets get a steer from local events on Thursday, it will most likely come from China’s services PMI. The bar for beating the previous month is high – the last time services sector activity in China grew faster than March was almost three years ago.Indonesia’s economy, meanwhile, is expected to have contracted 1% in the first quarter as lower commodity prices hit exports and higher interest rates restricted domestic demand, according to a Reuters poll of economists. Here are three key developments that could provide more direction to markets on Friday:- China services PMI (April)- Indonesia GDP (Q1)- U.S. non-farm payrolls (April) (By Jamie McGeever) More

NEW YORK (Reuters) – Federal Reserve data on Thursday showed a large part of the central bank’s emergency lending activities in recent weeks were tied up with the now-shuttered First Republic Bank (OTC:FRCB). The Fed reported that while overall emergency lending to banks in the latest week tipped down a bit, the composition of the lending changed in key ways. The Fed said that money the bank had borrowed via the discount window, the central bank’s main source of liquidity for banks, and through the Bank Term Funding Program, had now shifted to “other credit.” That covers loans associated with the Federal Deposition Insurance Corporation’s work to deal with several high-profile bank failures that kicked off in March and spurred broad fears about the state of the banking system. The Fed reported that discount window borrowing fell to $5.3 billion on Wednesday from $73.9 billion the week before, while the BTFP saw loans slip to $75.8 billion, from $81.3 billion on April 26. But “other credit,” which was already large due to past bank failures, got even bigger, jumping to $228.2 billion as of Wendnesday, from April 26’s $170.4 billion.Steven Kelly, senior research associate at the Yale Program on Financial Stability, said the discount window borrowing decline was notable given that so much of it was linked to a single insitution, which argues against a broader crisis in the banking sector. “I hope that gets a headline and calms people down,” he said.The still strong takeup at the BTFP might not be fully crisis related, as the facility offers very attractive terms and the Fed has encourged banks to tap its liquidity if needed.In his press conference following the Fed’s quarter percentage point rate rise on Wendnesday, central bank leader Jerome Powell sought to stress what he saw as contained problems among banks. Condtions in the banking sector “have broadly improved since early March, and the U.S banking system is sound and resilient,” Powell said. Borrowing via the three main programs saw an overall decline in the latest week, moving to $309.3 billion on Wednesday, from $325.6 billion on April 26. Fed lending surged in March driven by banking sector troubles and has remained at very high levels since that initial surge. TD Securities said in a note Thursday that the still high levels of overall borrowing from the Fed reflects “ongoing banking system uncertainty.” More

NEW YORK (Reuters) – A global measure of stocks fell for the fourth consecutive day while the dollar gained some ground as the European Central Bank raised rates on Thursday and signalled the need for more tightening a day after the U.S. Federal Reserve also raised rates.U.S. Treasury yields were lower while oil prices stabilized after sharply declining earlier in the week.Along with investor indigestion over central bank messaging, Wall Street stock indexes were also under pressure from another rout in U.S. bank shares, which have reeled from the collapse of a third major regional bank over the weekend.European stocks closed lower after the ECB, the central bank for the 20 countries that share the euro currency, raised interest rates by 25 basis points to 3.25% and signalled that more tightening would be needed to tame inflation.In contrast to the ECB, the Fed had implied that its marathon hiking cycle may be ending. While the idea of a pause in U.S. rate hikes was welcome news for U.S. investors, it came with the implication that the economy is slowing, said Lauren Goodwin, economist and portfolio strategist at New York Life Investments in New York. “This balance between potential interest rate stability and an increase in recession risk is what markets are trying to digest today,” said Goodwin. In particular, the economist saw the Fed’s reference to tightening credit conditions as a confirmation of her expectations of an economic downturn. “It’s highly unlikely we’ll avoid a recession,” Goodwin said. “We’re on a clear path toward a recession in the next few months.”The Dow Jones Industrial Average fell 286.5 points, or 0.86%, to 33,127.74, the S&P 500 lost 29.53 points, or 0.72%, to 4,061.22. The Nasdaq Composite dropped 58.93 points, or 0.49%, to 11,966.40.All three of Wall Street’s major indexes marked their fourth straight day of losses. For Nasdaq it was its longest stretch of losses since December.MSCI’s gauge of stocks across the globe shed 0.47% reflecting its first four-day losing streak since mid-March.In contrast, emerging market stocks rose 0.70% after three straight sessions of declines. Adding to U.S. investor worries, another U.S. regional bank – PacWest Bancorp – signalled troubles days after First Republic collapsed. The S&P 500 bank index closed down 2.8% while the KBW regional banking index lost 3.5%. Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, noted that concerns about banks, and the tighter lending conditions they are now offering, spilled into other sectors such as the Dow Transports index, which closed down 1.3%.”With the banking crisis we’ll have tighter credit. There’ll be less lenders willing to lend,” said Ghriskey who notes the example that airlines will face higher rates and less available credit available to buy new aircraft.Among currencies, the dollar gained against the euro as investors digested the ECB’s rate hike.The dollar index rose 0.188%, with the euro down 0.43% to $1.1011. The Japanese yen strengthened 0.39% versus the greenback at 134.16 per dollar. “The monetary policy dynamics are more or less fully priced in here at this point in terms of the tightening cycle. Now, it’s going to be a focus on the bets on when the Fed starts to ease, how much it eases and how that relates to what (other) central banks are doing,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. In Treasuries, benchmark 10-year yields and 2-year yields sank as investors worried about regional banks and signs of a weakening economy. Benchmark 10-year notes were down 3.4 basis points to 3.369%, from 3.403% late on Wednesday. The 30-year bond was last up 0.9 basis points to yield 3.7243%, from 3.715%. The 2-year note was last was down 17.3 basis points to yield 3.7656%, from 3.939%.In energy, crude oil prices stabilized after three straight days of sharp declines due to demand concerns in major consuming countries resulting from worries about the global economy.U.S. crude settled down 0.06% at $68.56 per barrel and Brent ended at $72.50, up 0.24% on the day.Meanwhile, spot gold had touched its highest level in years as U.S. banking concerns accelerated a flight to the safe-haven asset.Spot gold added 0.6% to $2,050.66 an ounce. U.S. gold futures gained 0.95% to $2,047.90 an ounce. More

Good morning. Chinese tourist spending during this week’s labour day holiday has exceeded pre-pandemic levels for the first time, in a sign of economic momentum, authorities have said.Travel this past week was closely watched as an indicator of the Chinese economy’s recovery and as a barometer for consumer spending since the government lifted pandemic restrictions late last year. China recorded 274mn domestic trips over the five days to Wednesday, according to the Ministry of Culture and Tourism, 71 per cent higher year on year and 19 per cent higher than in 2019. Total tourism revenues were Rmb148bn ($21.5bn), up sharply year on year and 1 per cent higher than the comparable 2019 level. The figures indicated a clear improvement in travel and spending compared with recent holidays such as lunar new year in January, which was affected by a wave of infections in the biggest cities as the government rolled back its zero-Covid regime.Although international flights are recovering more slowly than domestic flights in China, Washington announced yesterday that Chinese airlines will be allowed to expand their flights to the US — a small concession to Beijing amid tensions between the two nations. Here’s what else is happening in the coming days:Australia: Reserve Bank of Australia will publish its quarterly economic outlook today.Black Sea grain deal discussions: Defence officials from Turkey, Ukraine and Russia will meet in Istanbul today for talks on the Black Sea Grain Initiative.Coronation: Charles III and Camilla will be crowned king and queen of the United Kingdom and the Commonwealth on Saturday. Berkshire Hathaway: Warren Buffett’s company will holds its renowned annual shareholders meeting in Omaha, Nebraska, on Saturday. Five more top stories1. US regional banks suffered severe share price declines amid fresh calls for an intervention from Washington. As PacWest became the latest bank to seek a financial lifeline, activist investor Nelson Peltz told the FT that the deposit insurance limit should be increased. Here’s the latest on the US banking turmoil.2. European Central Bank raised interest rates by a quarter of a percentage point yesterday, as president Christine Lagarde warned the fight against inflation is not yet won. Lagarde signalled that it would not be the last such move this year. See her full remarks.3. Chinese authorities have moved to tighten controls on sensitive corporate information, with Beijing telling state-owned companies and those listed on the mainland to step up security checks when appointing auditors. It’s the latest sign of regulators’ concerns regarding the security of corporate data.4. Adani Group has completed the sale of its port business in Myanmar, marking an exit from a flagship foreign investment that has been long criticised by human rights campaigners. Solar Energy Ltd will buy the Yangon-based business for $30mn, but there are calls for Adani to donate proceeds from the sale.5. The parent company of one of China’s biggest ecommerce sites has moved its headquarters to Ireland, a move analysts suggest is meant to shield the company from US-China tensions. The shift could also have tax benefits for PDD Holdings, which owns ecommerce site Pinduoduo and online marketplace Temu. How well did you keep up with the news this week. Take our quiz.The Big Read

Rina Gonoi is releasing a book about her time in Japan’s Ground Self-Defense Forces © FT montage/Getty Images

Next week Rina Gonoi will release her account of two harrowing years as a member of Japan’s Ground Self-Defense Forces. Her story has forced unprecedented self-examination at a pivotal time for the Japan’s military as budgets expand to help the country respond to the increased threat from China. Is Japan’s military fit for purpose, asks today’s Big Read. We’re also reading . . . Russia’s Indian tankers: Gatik Ship Management has emerged seemingly out nowhere as an international oil shipping giant since the war in Ukraine. Civic duty: This week’s local elections will be the first time that many Hongkongers on British National (Overseas) visas will vote in the UK. But voting is hardly straightforward for these families, writes Georgina Quach. ‘Birdwatch’: The strength of Twitter’s Community Notes fact-checking feature is that it works through consensus, writes Jemima Kelly. Chart of the dayCryptocurrency trading activity has dwindled even as bitcoin enjoys its longest winning streak in more than two years. It’s the latest sign that many investors are increasingly reluctant to buy into the rebound after a string of collapses and scandals in 2022.Take a break from the newsTim Bevan and Eric Fellner reinvented popular British cinema with hits from Four Weddings to Love Actually. The industry has changed remarkably since then. But their MO is much as it was 30 years ago. “Every movie still essentially comes down to this: cover your nuts and jump,” Bevan said.

Additional contributions by Gordon Smith and Tee Zhuo More