Dhe emergency takeover of the major Swiss bank Credit Suisse (CS) by its competitor UBS also brought relief to investors on the US stock exchanges on Monday. Wall Street and Nasdaq stock exchanges largely recouped Friday’s losses.
An agreement between six leading central banks, including the US Federal Reserve and the European Central Bank (ECB), also helped. From now on, US dollar transactions with a seven-day term will be carried out daily, since the supply of the world reserve currency, the dollar, is particularly important for the international business of large financial institutions. This is especially true in troubled times.
The Dow Jones Industrial increased by 1.20 percent to 32,244.58 points. On Friday, the best-known Wall Street index recorded a slight weekly minus after significant losses. The market-wide S&P 500 rose 0.89 percent to 3951.57 points on Monday. On the Nasdaq technology exchange, the Nasdaq 100 selection index rose by a more moderate 0.34 percent to 12,562.61 points. He had recovered more significantly in the past week.
Despite the relief, global markets strategists at US bank JPMorgan remain cautious. “There are decades where nothing happens and there are weeks where decades happen,” they headlined a study. They referred to the recent bank closures in the USA and the forced marriage of the big banks in Switzerland. They recalled the interest rate move by the ECB on Thursday and are waiting for the Fed’s interest rate decision on Wednesday.
They also highlighted events such as China’s mediation in the Middle East and President Xi Jinping’s visit to Russia, warning of the “possibility of a Minsky moment” in markets and geopolitically as well. What is meant by this is a sudden collapse of assets after a long upswing, caused by debt-financed speculative bubbles. “Even if central banks manage to contain the contagion, credit conditions are likely to tighten at a faster rate due to pressure from markets and regulators,” they wrote.
Among industries in the US, financials were back in demand after falling sharply over the past two weeks. Among the big banks, JPMorgan was up 1.1 percent on the Dow and Goldman Sachs was up 2.0 percent. Papers from other financial institutions, such as the Bank of New York Mellon or Capital One Financial, also rose more significantly again.
The trigger for the sell-off at the beginning of March was the liquidation of the US financial group Silvergate Capital, which is geared towards the crypto industry. A few days later, the US money house Silicon Valley Bank (SVB), which specializes in start-up financing, was placed under the control of the US deposit insurance company FDIC and closed. This was followed by the closure of Signature Bank.
First Citizens is reportedly planning a bid for Silicon Valley Bank
According to an insider, the bank wants to offer First Citizens Bancshares for the Silicon Valley Bank. First Citizens will submit the bid to the US Deposit Insurance Fund (FDIC), a person familiar with the plans said, according to Reuters news agency. It is also possible that First Citizens will only submit an offer for parts of the SVB. The FDIC deposit insurance fund took over the SVB on March 10 and had already made an unsuccessful attempt to sell the institute. First Citizen declined to comment.
The First Republic Bank is also badly hit. Shares in the regional bank fell to a record low, ending the day down another 47 percent. A second downgrading of creditworthiness within a few days had a negative impact. As the rating agency Standard & Poor’s wrote as a reason, the bank’s problems have not yet been solved even with the promise of 30 billion dollars by a number of large US banks. The papers of the New York Community Bancorp, on the other hand, jumped almost 32 percent. It takes over parts of the Signature Bank.
Meanwhile, according to a newspaper report, JPMorgan and other major US banks are talking about aid for the First Republic, which has lost investor confidence and recently lost almost half its market capitalization. Led by JPMorgan CEO Jamie Dimon, the big banks are talking about possible support measures for the smaller San Francisco-based bank, the Wall Street Journal reports. Consideration is being given to converting bank deposits of 30 billion dollars in whole or in part into capital. JPMorgan and First Republic declined to comment.
Shares of the Swiss bank UBS close in positive territory
After the takeover of the problem bank Credit Suisse, the shares of the major Swiss bank UBS rose slightly on Monday. At the close of the Zurich stock exchange, the UBS price was up 1.26 percent and reached 17.33 Swiss francs. When the stock market started in the morning, the UBS price had initially collapsed. The minus was initially around 15 percent. But then the UBS price recovered increasingly.
Credit Suisse shares, on the other hand, closed down 55.74 percent. It was CHF 0.82, just above the purchase price of CHF 0.76 per share agreed at the time of the takeover.
UBS bought Credit Suisse for three billion francs on Sunday after days of negotiations. The government of Switzerland had called this “crucial” not only for Switzerland, but for the stability of the entire global financial system. USB will pay the purchase price in its own shares. The central bank of Switzerland has announced liquidity support of up to 100 billion Swiss francs.