Credit Suisse ring brings stability to global markets
Turmoil in global financial markets eased and stabilised after regulators added a major ring to Credit Suisse Group AG. Still, aftershocks of turmoil lingered as signs of volatility lifted, and overnight gains in U.S. futures faded ahead of the European Central Bank’s final rate decision.
European shares advanced, with Credit Suisse posting its biggest gain in history, sending the bank’s shares up more than 1%. U.S. stock futures edged up slightly. Regional banks in the S&P 500 index are clinging to leveraged gains, though sharply lower for the week. The Cboe Volatility Index advanced to 27.
Treasuries were lower in early trade, pushing the two-year gain back to 4% after hitting historic lows in the past few days.
- Bonds fell across Europe.
- The dollar index fell by a percentage.
- After a hard sell-off, the Swiss franc stabilised.
- The euro recovered from a two-month low.
Banking Sector Volatility Drags S&P 500 Down
Volatility in the banking sector – which began last week with the closure of Silicon Valley Bank and Signature Bank – has completely erased the S&P 500’s strong performance this year. Now experts await the Federal Reserve’s policy meeting, where traders are equally divided on whether the central bank will raise interest rates. Market prices suggest the Fed will soon reverse course and cut rates by 1% by the end of this year.
Major US bank stocks retreated on positive sentiment towards Credit Suisse and the European banking sector.
Citigroup declined 5.5%, while Wells Fargo and Goldman Sachs each lost 3.2%. Financial Select Sector SPDR Fund loss is 2.8%.
Regional banks rebounded on Tuesday to outperform the broader market and retreated again on Wednesday. The SPDR S&P Regional Bank ETF fell 1.7%, more than 21% and 13% in First Republic Bank and PacWest Bancorp.
The three major indicators were mixed as the market closed.
The Dow and S&P 500 were down 0.9% and 0.8%, respectively. Also, the Nasdaq Composite was up just 0.12%.
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