Following the Silicon Valley Bank and Signature Bans fallout, Credit Suisse’s chaos has again spooked investors, as regional banking failures ripple through global markets.
The Swiss-listed bank’s shares tumbled 24% after its largest investor, Saudi National Bank, said it would not provide any further financial assistance. The contagion effect spread to other regions, causing a renewed sharp decline in US and European bank stocks. Bonds and gold again surged amid the risk-off sentiment, as rates slumped on bets for a sooner-than-expected pivot on US interest rate policy from the Federal Reserve. Notably, big tech shares were much more resilient despite rising recession risks, due to Fed policy optimism.
The US dollar strengthened as both the Eurodollar and the Swiss franc fell sharply, while commodity currencies softened due to a sharp drop in energy and industrial metal prices. It is a typical market reaction to a pending financial crisis, with all eyes on the ECB policy meeting later today. A softer stance on the tightening measures may be expected amid the current market rout.
Asian markets are set to open sharply lower, with ASX futures down 1.68%, Hang Seng index futures sinking 2.11%, and Nikkei 225 futures falling 1.9%.
- Eight out of 11 sectors in the S&P 500 finished lower, with energy, material, and financial sectors leading losses, all down more than 3%. All major oil producers, including Occidental Petroleum, and Exxon Mobil, which are both down more than 5%. Devon Energy fell 8 4%. On the other hand, the communication service stocks outperformed, led by Meta Platforms, up 1.75. The defensive sectors, such as utility and consumer staples also finished higher.
- Government bond yields in both the EU and the US again tumbled on the back of spreading contagion risk, with the yield on the US 2-year notes dived 33 basis points to a six-month low. The magnitude of volatilities in bond markets was only seen during crisis times, such as the pandemic in March 2020, and GFC in 2008.
- European stock markets tumbled amid the banking crisis, with all the regional stock markets down more than 3%. The Swiss National Bank says it will provide Credit Suisse with liquidity if necessary.
- Gold futures surged 36 dollars per ounce to a five-week high before pulling back to 1,922. Gold is probably the most favour haven asset amid the market rout. The upside momentum may take the precious metal to hit the February high of 1,960.
Crude oil plunged to a 14-month low due to recession fears. The WTI futures plummeted more than 4%, finishing below pivotal support of $70 per barrel.
- The growth-sensitive industrial metal, Copper futures also sharply declined to the lowest level since 6 January due to fear of a sooner economic recession.
On today’s agenda
- New Zealand fourth-quarter GDP will be on watch today, with a consensus calling for a 0.2% drop sequentially.
- Australian employment change for February will be on investors’ radar today. The January unemployment rate unexpectedly rose to 3.7% from 3.5% in the prior month. Another weakened labour market will most likely promote the RBA to turn dovish against the bleeding market backdrop globally.
- The ECB policy meeting will be on close watch today. The central bank was expected to raise the interest rate by another 50 basis points this week. However, the ongoing banking sector’s rout may alter its stance on the aggressive tightening steps.
ASX and NZX news
Fonterra Shareholders Fund lifts guidance, posting a net profit up 50% to $NZ546 million for the second half. It will pay an interim dividend of 10 cents on earnings of NZ33 cents per share.
- BHP Group announced to defend the UK high court proceedings amid compensation for the miner’s alleged failures in the Samarco dam collapse in Brazil.
- Infinity Lithium announced a loss of $$2.3 million after tax for the second half vs. $4.2 million in loss from a year ago. The company’s per-share loss is A$0.56 vs A$1.02 during the same period last year.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.