The Dow Jones Industrial Average fell Wednesday as investors contemplated the future of Credit Suisse, a bank with a large international and US presence, and peers.
The Swiss bank’s shares have plunged 25 per cent after the Silicon Valley Bank collapsed, raising concerns about contagion. The Saudi National Bank, Credit Suisse’s biggest shareholder, said it would not provide further assistance after injecting $1 billion.
This is on top of the severe issues the Swiss bank has faced in recent months, announcing “material weaknesses” in its reporting and control procedures following a probe by the SEC.
Shares are now down 96.7 per cent from their all-time highs, and their credit default swaps are pricing in a 40 per cent probability of default, with 2026 bonds entering distressed levels.
However, Swiss regulators could end up saving the day, as there are reports that they are in talks about options to stabilise the bank.
Overall, overnight, the Dow Jones Industrial Average ended 280.83 points, or 0.87 per cent, lower at 31,874.57. The S&P 500 dropped 0.7 per cent to 3,891.97, while the Nasdaq Composite was up just 0.05 per cent at 11,434.
The major averages, however, were well off their session lows. The Dow at one point was down 725 points, and the S&P 500 briefly gave up all of its 2023 gains.
Credit Suisse dragged down the European Bank sector, and sparked a broader sell off in the continent, US big bank shares declined in sympathy. Citigroup slid 5 per cent, while Wells Fargo and Goldman Sachs each lost 3 per cent. Bank of America slipped just under 1 per cent. The Financial Select Sector SPDR Fund lost 2.6 per cent, giving up its 2 per cent pop on Tuesday.
Regional banks, which rebounded Tuesday to lift sentiment for the broader market, fell back into the red again. The SPDR S&P Regional Banking ETF was down 1.6 per cent, pushed down by losses of more than 20 per cent and 10 per cent in First Republic Bank and PacWest Bancorp, respectively.
In commodity related news, global physically backed gold ETFs experienced their 10th consecutive month of outflows in February 2023, losing $1.7 billion in value, as per the World Gold Council (WGC) report. This was due to a decline in gold prices mainly due to a stronger dollar and rising yields.
Oil prices tumbled around 7 per cent to their lowest level since December 2021, as traders feared a brewing banking crisis could dent global economic growth. Analysts are forecasting that weakening demand outlook is likely to persist in the short term.
Overnight, US sectors were mostly lower. Communication Services was the best performer, whilst off the back of the fall in oil prices, energy was the biggest laggard.
The SPI futures are pointing to a 1.68 per cent fall.
One Australian dollar at 7:25 AM has weakened compared to the US dollar yesterday buying 66.18 US cents (Wed: 66.82 US cents).
Iron ore futures are pointing to a 1 per cent fall.
Gold added 0.5 per cent. Silver lost 0.6 per cent. Copper dropped 3.04 per cent and oil lost 4.2 per cent.
Figures around the globe
Across the Atlantic, European markets closed lower. London’s FTSE dropped 3.8 per cent, Frankfurt lost 3.3 per cent while Paris closed 3.6 per cent lower.
In Asian markets, Tokyo’s Nikkei closed flat, Hong Kong’s Hang Seng added 1.5 per cent while China’s Shanghai Composite closed 0.6 per cent higher.
Yesterday, the Australian sharemarket closed 0.9 per cent higher at 7068.92.
CPT Global (ASX:CGO) is paying 0.6 cents fully franked
Countplus (ASX:CUP) is paying 1.5 cents fully franked
Data#3 (ASX:DTL) is paying 10 cents fully franked
Eureka Group (ASX:EGH) is paying 0.67 cents unfranked
Embelton (ASX:EMB) is paying 10 cents fully franked
Fletcher Building (ASX:FBU) is paying 16.3845 cents unfranked
IGO (ASX:IGO) is paying 14 cents fully franked
Macmahon Holdings (ASX:MAH) is paying 0.3 cents unfranked
Motorcycle Hldg (ASX:MTO) is paying 8 cents fully franked
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
PWR Holdings (ASX:PWH) is paying 3.6 cents fully franked
Regis Healthcare (ASX:REG) is paying 2 cents 50 per cent franked
Spark New Zealand (ASX:SPK) is paying 12.2238 cents unfranked
WCM Global Growth (ASX:WQG) is paying 3.25 cents fully franked
Australian Ethical Investment (ASX:AEF)
ResMed Inc (ASX:RMD)
Domino’s Pizza Enterprises (ASX:DMP)
Sunland Group (ASX:SDG)
Shaver Shop Group (ASX:SSG)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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