Concern about global banking system
Dow recoups losses
03/15/2023, 10:17 p.m
In view of the new negative headlines from the banking sector, the US stock exchanges are faring much better than European stock markets. The New York leading index Dow Jones visibly curbs its losses in the course of trading, the Nasdaq even creates a small plus.
Problems at major Swiss bank Credit Suisse (CS) have weighed on Wall Street again after a breather. The Dow Jones Index However, the standard values contained its losses in the course of trading and closed 0.9 percent lower on Wednesday at 31,874 points. The tech-heavy one Nasdaq advanced by a moderate 0.1 percent to 11,434 points. The broad one S&P 500 lost 0.7 percent to 3891 points.
The announcement that the new CS major shareholder Saudi National Bank cannot inject fresh funds for regulatory reasons has apparently revived fears of the consequences of the collapse of California’s Silicon Valley Bank (SVB). At times, the shares fell 31 percent to an all-time low of 1.55 francs and ended trading in Zurich 24 percent lower at 1.69 francs. This dragged global equity markets down with it.
“Anything negative that comes from a well-known institution, in this case Credit Suisse, will have an impact on the entire financial sector,” said Michael James, head of equities trading at investment bank Wedbush. Shortly before the market closed in the USA, the Swiss National Bank (SNB) announced that it would rush to Credit Suisse’s aid. “If necessary, the SNB will make liquidity available to CS,” announced the central bank and the financial market supervisory authority Finma in a joint statement. Credit Suisse meets the capital and liquidity requirements of systemically important banks. The problems of banks in the USA do not pose a direct risk of contagion for the Swiss financial market.
Shares of big money houses like JP Morgan, Wells Fargo Citigroup, Goldman Sachs, Morgan Stanley and Bank of America fell between one and 5.4 percent. The regional banks First Republic and PacWest lost up to almost 13 percent. Other small banks, such as Western Alliance and Charles Schwab, gained a good eight and more than five percent respectively. “In the financial markets you have to look to those who can weather the bad times and don’t have as much investment risk in their portfolios,” said Jeffrey Carbone, managing director of wealth manager Cornerstone.
Investors flee to safe havens
Worries about the global banking system also weighed on other sectors. The papers of major US airlines such as Southwest Airlines, Delta, United Airlines and American Airlines became cheaper by up to 6.6 percent. A decline in the number of aircraft delivered also weighed on Boeing shares. The aircraft manufacturer’s shares fell by 4.3 percent. Boeing delivered just 24 737 Max aircraft in February, down from 34 in January, due to supply chain issues.
In view of the uncertainties in the banking sector, investors fled to safe havens. Demand for US 10-year bonds skyrocketed. In turn, the yield fell further to 3.464 percent from 3.636 percent on Tuesday. Investors also grabbed the dollar, which was seen as a safe investment. The dollar index, which measures value against major currencies, gained up to 1.3 percent to 105.10 points. Gold rose 0.8 percent to $1,918 a troy ounce.