Credit Suisse shares fell to a historic low
London (AFP) - Stock markets sank on Wednesday on renewed fears of a burgeoning banking crisis, snapping a one-day rally as Credit Suisse shares cratered to lead a rout in major lenders.
Global markets have been rattled by the collapse of tech sector lenders Silicon Valley Bank and Signature, the sector’s biggest failures since the 2008 financial crisis.
After a rebound on Tuesday, equities fell again on Wednesday, with Europe’s main indices closing more than three percent in the red and the Dow Industrial Average shedding over two percent to lead a slump on Wall Street.
London’s FTSE 100 fell by 3.8 percent in its biggest loss in one day since the war in Ukraine erupted in late February 2022.
“You get the picture: investors were panicking. Bloodbath, if you will,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
“Concerns over another 2008-style financial crises have intensified,” he said.
The euro fell 1.8 percent against the dollar, its steepest daily drop since March 2020, while oil prices fell more than seven percent to their lowest levels since December 2021.
Shares of Credit Suisse, Switzerland’s second biggest bank, crashed by more than 30 percent to hit a record low. They closed down more than 24 percent.
Credit Suisse, already mired in scandals prior to the US banking upheaval, was hammered by the markets after its main shareholder, Saudi National Bank, ruled out ploughing more cash into the bank.
“Investors took fresh fright after Credit Suisse’s problems multiplied,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Bank shares tumbled across Europe, with British group Barclays, Germany’s Commerzbank, France’s BNP Paribas and Societe Generale shedding between seven and 12 percent.
“What began as a regional banking crisis in the US has suddenly morphed into a European one,” said IG analyst Chris Beauchamp.
On Wall Street, JPMorgan Chase fell 5.5 percent, Citigroup lost 6.2 percent and embattled regional bank First Republic sank more than 23 percent.
- Rate hike doubts -
SVB and Signature were the biggest banking casualties since the global financial crisis of 2008, forcing US authorities to take them over and step in at the weekend to guarantee customer deposits.
The upheaval comes as the European Central Bank is poised to raise interest rates again Thursday to tackle high inflation.
But the crisis at SVB was blamed in part on high interest rates, which wrecked the value of the bank’s bond portfolio.
“Surely the ECB are not going to hike yet again just as the crisis intensifies,” Beauchamp told AFP.
The US Federal Reserve will hold its own rate-hike meeting next week, with the fast-moving situation clouding the picture as markets panic.
“There still remains a lot of question marks with respect to how bad this is going to get,” said Adam Sarhan of 50 Park Investments.
“But for now, defense is king until we have some clarity.”
- Key figures around 1655 GMT -
New York - Dow: DOWN 2.3 percent at 31,432.32 points
New York - S&P 500: DOWN 2.1 percent at 3,838.24
New York - NASDAQ: DOWN 1.5 percent at 11,258.22
London - FTSE 100: DOWN 3.8 percent at 7,344.45 (close)
Frankfurt - DAX: DOWN 3.3 percent at 14,735.26 (close)
Paris - CAC 40: DOWN 3.6 percent at 6,885.71 (close)
EURO STOXX 50: DOWN 3.5 percent at 4,034.92 (close)
Tokyo - Nikkei 225: FLAT at 27,229.48 (close)
Hong Kong - Hang Seng Index: UP 1.5 percent at 19,539.87 (close)
Shanghai - Composite: UP 0.6 percent at 3,263.21 (close)
Euro/dollar: DOWN at $1.0544 from $1.0735 on Tuesday
Pound/dollar: DOWN at $1.2015 from $1.2156
Euro/pound: DOWN at 87.77 pence from 88.29 pence
Dollar/yen: DOWN at 132.72 yen from 134.20 yen
West Texas Intermediate: DOWN 7.7 percent at $65.82 per barrel
Brent North Sea crude: DOWN 7.3 percent at $71.81 per barrel