Current Futures: Dow +52.00, S&P +6.20, NASDAQ +3.75
Asian markets are trading slightly under the breakeven line, while U.S. futures advanced after the Fed released the official stress test results.
According to the Fed’s findings, ten of the nineteen banks will require additional capital. Bank of America is currently in the worst position, needing $33.9 billion in fresh capital. BofA is followed by Wells Fargo, which will have to raise up to $13.7 billion, and by Citigroup, which is expected to raise $5.5 billion. The total shortfall of the 10 banks reaches $74.6 billion. Moreover, the stress results showed that mortgage losses are still the biggest threat for the U.S. financial system. Losses fueled by mortgages could reach up to $185.5 billion over the next few quarters, if the economic conditions continue to weaken.
TheLFB-Forex.com Trade Team notes that the stress test results have been positively interpreted so far, as investors were leaked the numbers a few days prior to the release. Even though the banks still need to raise additional capital this may prove to be an opportunity for the shareholders, as the shares of the banks implied in the stress test rose after the results were published. Citi and BofA, which according to the findings are the most undercapitalized two banks, rose more than 7% in the after hours session. At the same time, Goldman Sachs, one of the nine banks that does not need additional capital and plans to pay back the TARP funds, rose only 2% in the after hours session. Moreover, from the beginning of March, Citi shares rose 150%, while Goldman’s “only” 55%, TheLFB-Forex.com Trade Team notes.
Overnight, the Japanese Nikkei gained 6.96 points (0.07%) to 9,392.66. The Australian S&P/Asx slipped 22.70 points (0.58%) to 3,916.00.
Crude oil for May delivery was recently trading at $57.25 per barrel, up by $0.50.
Gold for May delivery was recently trading lower by $1.70 to $913.80.