First interest rate break bets
Wall Street brushes contagion concerns aside
03/20/2023 9:53 p.m
The emergency takeover of the major Swiss bank Credit Suisse by its competitor UBS has brought relief to the US stock markets. Wall Street’s losses on Friday are largely being recouped. Initial hopes that the Fed will pause interest rates are burgeoning.
After the emergency takeover of the ailing Credit Suisse, investors on Wall Street breathed a sigh of relief at the start of the week. The Dow Jones Index the standard values closed 1.2 percent higher in the evening at 32,244 points. The tech-heavy one Nasdaq advanced 0.4 percent to 11,675 points. The broad one S&P 500 increased 0.9 percent to 3951 points. “There’s more good news than bad news on the banking front,” said Art Hogan, strategist at wealth manager B Riley Wealth. “First and foremost, the Credit Suisse-UBS merger certainly takes a lot of the stress out of the global banking system, and Signature Bank, which found a prospect over the weekend, was also something investors are feeling at least more confident about.”
Following the state-backed takeover of major Swiss bank Credit Suisse (CS) by rival UBS, shares in major US banks such as JPMorgan and Morgan Stanley rose 1.1 percent and 1.7 percent, respectively. In contrast, Citigroup gave back its initial profits.
Concerns about First Republic Bank remain
The ailing US regional bank First Republic caused a headache again, with shares falling by 50 percent at the top. At the end of trading there was still a minus of 47 percent. Investors spooked speculation that the regional lender might need a second injection of cash within days. According to a newspaper report, JPMorgan and other major US banks are talking about aid for the ailing regional bank.
Due to the large price fluctuations, trading in the share was temporarily suspended several times. Meanwhile, the announcement that deposit outflows had stabilized caused the stocks of the US regional bank PacWest to jump by more than 20 percent. New York Community Bancorp rose more than 31 percent after the bank agreed to take over deposits and loans from the collapsed Signature Bank.
After initial skepticism, the multi-billion dollar bailout for Credit Suisse also gave investors in Europe a sigh of relief. The Dax rose around one percent to 14,933 points. “The fact that the UBS takeover happened so quickly that the bank didn’t collapse, and that it was a corporate takeover and not a government or agency bailout, obviously caused markets to take a slightly better view of the situation in the banking sector assess,” said Danni Hewson, an analyst at financial services firm AJ Bell.
Is the Fed on a rate pause?
The interest rate decision by the US Federal Reserve increasingly moved into the focus of stockbrokers this Wednesday. Looking at the troubles in the banking sector, investors were betting that the Fed would pause raising interest rates to fight inflation. “The market has digested the marriage between UBS and Credit Suisse. Systemic risk has eased somewhat and everyone is excited to see what the Fed will do,” said Matt Orton, chief market strategist at Raymond James Investment Management.
At the same time, the waning fear of a banking crisis slowed down the rush for safe investments. In return, the yield on ten-year Treasuries rose to as much as 3.519 percent from the previous 3.397 percent. The gold price fell 0.3 percent to $1,982 a troy ounce.
The second wave of layoffs began in the individual values Amazon the US group under pressure. The online retailer’s titles fell 1.3 percent. As the second major US technology group, Amazon is again putting thousands of employees out of the door. Because of the gloomy economic prospects, technology companies are trying to cut costs.