Global stock markets tumble after the Credit Suisse takeover
BEIJING (AP) – Global stock markets sank on Monday after Swiss authorities staged a takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on possible further rate hikes of interest.
Hong Kong’s main index fell 2.7%. London, Frankfurt and Paris opened down more than 1%. Shanghai, Tokyo and Sydney are also down. Wall Street futures are down 1%. Oil prices have plummeted by more than $2 a barrel.
Swiss authorities announced on Sunday that UBS would acquire its smaller rival as regulators seek to ease fears about banks following the collapse of two US lenders. Central banks have announced coordinated efforts to stabilize creditors, including a facility to borrow US dollars if needed.
The benchmark Swiss stock fell 1.8%, while shares of Credit Suisse plunged 63% and rival UBS, which is acquiring it, fell 14%.
Investors fear that banks are collapsing under the strain of unexpectedly rapid and large rate hikes over the past year to cool economic activity and inflation. The prices of bonds and other assets on their books have fallen, fueling distress about the financial health of the sector.
“Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” SPI Asset Management’s Stephen Innes said in a report.
In early trading, London’s FTSE 100 lost 1.6% to 7,220.62. Frankfurt’s DAX fell 1.4% to 14,555.79 and Paris’ CAC 40 lost 1.2% to 6,842.36.
Shares of European banks languished, with Deutsche Bank AG shedding 3.7% and Banco Santander SA 1%. Société Générale lost 3.4% and Credit Agricole 1.1%.
On Wall Street, the future of the benchmark S&P 500 index was down 0.2%. That for the Dow Jones Industrial Average fell 0.4%. The S&P 500 lost 1.1% on Friday. The Dow fell 1.2% and the Nasdaq Composite lost 0.7%.
In Asia, Hong Kong’s Hang Seng lost 2.7% on Monday to 18,879.20 after falling 3.3% at one point on heavy selling in technology and financial stocks.
In Hong Kong, HSBC Holdings plc lost 6.23%, while Standard Chartered lost 7.3% and Bank of East Asia lost 4.5%. Japanese banks were also mostly down, with Mizuho Financial Group down 2.3% and smaller bank Resona Holdings down 3.7%. In Australia, Macquarie Group lost 4.6%.
Tokyo’s Nikkei 225 lost 1.4% to 26,945.67.
The Shanghai Composite Index lost 0.5% to 3,234.91 after China’s central bank on Friday freed up more money for loans by reducing the amount of their deposits that commercial lenders must hold in reserve.
Seoul’s Kospi fell 0.7% to 2,379.20 and Sydney’s S&P-ASX 200 lost 1.4% to 6,898.50.
India’s Sensex lost 1.3% to 57,241.45. The New Zealand and Southeast Asian markets also declined.
The Swiss government said UBS would acquire Credit Suisse for nearly $3.25 billion after a plan for the ailing lender to borrow up to $54 billion from the Swiss central bank failed to reassure investors and customers.
US regulators have also tried to allay fears about threats to banking systems. The Federal Reserve said cash-strapped banks borrowed about $300 billion in the week to Thursday.
Separately, New York Community Bank has agreed to buy part of failed Signature Bank in a $2.7 billion deal, Federal Deposit Insurance Corp. said Sunday. The FDIC said $60 billion of Signature Bank loans they will remain in receivership and should be sold in time.
Traders expect last week’s turmoil to lead the Fed to limit a rate hike at this week’s meeting to 0.25 percentage points. It would be the same as the previous increase and half of the margin traders previously expected.
A survey released on Friday by the University of Michigan showed inflation expectations among American consumers are declining. This is important to the Fed, which has said such expectations can fuel virtuous and vicious circles.
In energy markets, benchmark U.S. crude oil fell $2.45 to $64.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74. Brent crude, the basis of international oil prices, lost $2.67 to $70.30 a barrel in London. It fell $1.73 the previous session to $72.97.
The dollar fell to 131.27 yen from 131.67 yen on Friday. The euro fell to $1.0664 from $1.0681.
