“We entered fairly oversold conditions by mid-February that didn’t really read across to the global macro environment,” Simon French, chief economist at Panmure Gordon & Co., told the Financial Times.
A rebound in the oil market may also be diminishing fears of potential energy defaults dragging down banks. Brent crude oil futures are back up 20% since its mid-February lows.
Moreover, the recovery in financials may reveal sentiment that central banks won’t throw a wrench into the system and fuel volatility.
The firmer financials reflect expectations that “the world’s central bankers will both keep rates lower for longer and put up with a little more inflation, especially in the US,” Nicholas Colas, chief market strategist at Convergex, told the Financial Times, explaining that the policy approach should push up long-dated rates and provide a boost for bank’s net interest margin.
Financial Select Sector SPDR
Max Chen contributed to this article.