Investors on Wall Street are likely to be torn by the developments surrounding Credit Suisse. On the one hand, there is a certain relief about the measures, including the takeover, to stabilize the major Swiss bank. On the other hand, there remains a certain distrust and concern about a new financial crisis – especially against the background of the recent bankruptcies among US regional banks. The stock futures market reflects this roller coaster ride and oscillates around the closing prices of the previous day. Support measures by the major central banks in the form of more dollar liquidity and in particular the news of the takeover of Credit Suisse by the domestic competitor UBS cannot completely allay the concerns. Credit Suisse’s additional tier 1 bonds (CoCo bonds) with a volume of around 16 billion Swiss francs, which have to be written off in full, are primarily contributing to this. Therefore, bank stocks are likely to be correspondingly weak.
In addition, investors are also holding back because of the upcoming meeting of the US Federal Reserve, the results of which will be published on Wednesday. The recent rate hikes actually support the traditional banking business. Retailers also blame them for the current turmoil in the banking sector. “The concerns that the aggressive monetary policy significant impacts on the economy, banking and human behavior in general are unmistakable and not yet visible on balance sheets. From this perspective, uncertainty could remain high for quite some time, even if recent measures to support banks are successful,” says Managing Partner Stephen Innes of SPI Asset Management.
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March 20, 2023 07:07 ET (11:07 GMT)