ASX builds on bright start, helped by Wall Street gains, RBA

The biggest gainer on the index was coal explorer New Hope Corporation, up 9.2 per cent, followed by Whitehaven Coal and Magellan Financial Group, which lifted 5.3 per cent and 4.7 per cent, respectively.

The poorest performers were West African Resources, Gold Road Resources and Cleanaway Waste Management, albeit by 2.2 per cent, 2.1 per cent and 2 per cent apiece.

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Andrew Forrest’s privately owned Wyloo Metals has announced an on-market takeover of nickel miner Mincor for $1.40 a share – a 35 per cent premium to the previous closing price of $1.04 – valuing the group at $760 million. Wyloo currently owns 19.9 per cent of Mincor, whose shares soared more than 40 per cent to a high of $1.49 this morning.

Meanwhile, law firm Maurice Blackburn said it was investigating a potential class action against Downer EDI after the company admitted to overstating its revenue, which triggered a share price plunge in December last year and again in February this year. The stock traded above $5 at the start of December and plunged to a low of $3 in February.

Maurice Blackburn Lawyers principal Miranda Nagy said: “Downer EDI investors have borne the brunt of what appears to be a significant accounting error, for which the company has given only limited explanation so far, notwithstanding that the chair, chief executive and chief financial officer have all recently departed the company.”

Overnight on Wall Street, the S&P 500 closed 0.9 per cent higher at 3951.57, with stocks in the financial industry helping to lead widespread gains. The Dow Jones Industrial Average jumped 1.2 per cent, while the Nasdaq composite ended the session 0.4 per cent higher.

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Much investor attention has been on banks as they may be cracking under the pressure of the fastest flurry of increases to interest rates in decades. Swiss banking giant UBS said on Sunday it would buy Credit Suisse for almost $US3.25 billion ($4.8 billion) in a deal quickly put together by regulators. Credit Suisse has been battling a unique set of troubles for years, but these came to a head last week as its stock price tumbled to a record low.

A group of central banks stretching from the United States to Japan also announced co-ordinated moves on Sunday meant to ease strains in the financial system. The moves would allow banks more access to US dollars if they need them, echoing a practice widely used in prior crises.

While the rescue manoeuvres don’t mean the banking industry’s crisis is over, “it’s taken one of the troublesome aspects off the table”, said Ryan Detrick, chief market strategist at Carson Group.

In the US, most of the attention has been on smaller and mid-sized banks on fears that falling trust could push their depositors to pull their money all at once. That’s what’s called a bank run, and such a move could topple them.

First Republic Bank has been at the centre of investors’ crosshairs this week in the hunt for the industry’s next victim following the second- and third-largest US bank failures in history. Its shares fell 26.2 per cent after S&P Global Ratings cut its credit rating for First Republic for a second time since Wednesday.

S&P said it could lower the rating even further despite a group of the biggest US banks announcing last week they would deposit $US30 billion in a sign of faith in First Republic and the larger banking industry.

While that money certainly helps, “it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing,” the credit-ratings agency said.

Stocks of other smaller- and mid-sized banks, meanwhile, were much stronger. New York Community Bancorp jumped 31.7 per cent after it agreed to buy much of Signature Bank in a $US2.7 billion deal, the Federal Deposit Insurance Corp said late on Sunday.

Signature Bank became the industry’s third-largest failure this month after regulators seized it.

Fifth Third Bancorp rose 6.4 per cent, and US Bancorp gained 6 per cent for two of the biggest gains in the S&P 500.

All eyes on the Fed

Much of the rest of the US stock market was also pushing higher, but how long that lasts is a question mark. A huge decision is looming on the calendar by the Federal Reserve.

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The US central bank will announce its latest move on interest rates on Wednesday [early Thursday AEDT]. For a while, Wall Street was betting it would re-accelerate its rises because of how stubborn high inflation has remained.

With AP

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