U.S. stock indices decline in trading today
U.S. stock indices are declining today. The day before, the Fed unexpectedly raised its key rate by 50 basis points, and central bank governors revised upward their forecast for the rate level for the end of 2023. Also, during a traditional press conference, Fed Chairman Jerome Powell repeatedly hinted that the Fed does not intend to begin cutting rates until at least early 2024.
“He zealously denied the idea that the Fed might lower rates next year. Instead, he noted that the Fed wants to take a long pause and pointed to the risks of premature monetary policy easing,” Investec’s Ellie Henderson wrote.
On Thursday, the European Central Bank and the Bank of England followed the example of the Fed and also raised their rates by 50 bps. Amid all the developments, the S&P 500 Index and major European indices started to decline.
U.S. stock indices today
Meanwhile, U.S. retail sales in November fell 0.6% versus the previous month, a record pace since the beginning of the year. Analysts polled by Bloomberg expected a decline of 0.2%, while Trading Economics forecast a decline of 0.1%. Retail sales excluding automobiles declined 0.2% last month after rising 1.2% in October, and the figure excluding cars and fuel was down 0.2% from a 0.8% increase a month earlier.
The number of initial claims for unemployment benefits in the U.S. last week unexpectedly fell by 20,000 to 211,000, according to a report from the U.S. Labor Department. Experts on average expected the indicator to remain around 230,000.
Industrial production in the U.S. in November fell by 0.2% compared to the previous month, while analysts expected growth of 0.1%. In annual terms, industrial production increased by 2.5%.
The Dow Jones Industrial Average index fell by 546.29 points (1.61%) to 3,420.06 points.
American Express Co (NYSE:AXP). is leading the decline among the index components, falling 3.5%. Of the 30 companies included in calculating the indicator, only shares of Verizon (NYSE:VZ) Communications are trading on the plus side, rising 1.9%.
Standard & Poor’s 500 declined 66.40 points (1.66%) to 3,928.92 points.
The Nasdaq Composite fell 213.72 points (1.91%) to 10957.17.
Earlier we reported that Apple plans to take production of iPhones out of China.
Collapsed SVB Bank to be sold off piecemeal
In the U.S. could not find a buyer for the Silicon Valley Bank, which survived bankruptcy, and therefore regulators have decided to sell the credit institution in parts. It was reported by Bloomberg. Note the volatility throughout the stock market, including the S&P 500.
According to the agency, the Federal Deposit Insurance Corporation is going to split the bank into two parts. It is reported that by Friday, bids will be submitted for an artificially created by the regulator “transitional bank”.
The Economist previously reported that the rapid collapse of Silicon Valley Bank (SVB) and the series of problems that followed revealed undervalued risk throughout the banking system. Because of this it is time for a global overhaul of the entire banking system.
On March 17, Bloomberg agency based on analysis of securities quotations of 166 credit organizations all over the world, reported that the best stock exchange results on the global stock market after failure of American investment bank SVB and Swiss Credit Suisse were shown by shares of Chinese credit organizations. The Bank of China, Industrial and Commercial Bank of China, China Construction Bank and other major banks of China are concerned.
Earlier we reported that UBS had acquired Credit Suisse for $3.2 billion.
UBS acquires Credit Suisse – merger agreement ready
UBS acquires Credit Suisse. The Swiss financial holding company will buy out its competitor Credit Suisse. The press-release says that under the terms of the deal UBS will pay with its shares at the scheme of one UBS share for 22.48 Credit Suisse shares. That ratio assumes that the entire bank was valued at 3 billion francs ($3.2 billion) in the transaction, the statement said.
That’s less than half of the bank’s market value at Friday’s close of 7.4 billion francs, or nearly $8 billion.
The merger, which is expected to be completed this year, will be done without shareholder approval procedures for both banks, the bank said. The deal assumes substantial government support. The government agreed to give UBS a government guarantee to cover potential losses of 9 billion francs ($ 9.7 billion) under a number of conditions. The National Bank, in turn, offered UBS 100 billion francs ($108 billion) to make up its liquidity.
UBS announced the takeover of Credit Suisse
Merger talks began this week amid a series of problems. Last month, the bank reported its biggest annual loss since the global financial crisis and said its customers withdrew more than 110 billion Swiss francs from their accounts in the fourth quarter.
The problems worsened in March, with the bank admitting “significant deficiencies” in its financial disclosure for the previous two years on March 14, and its largest shareholder, Saudi National Bank, saying it was not ready to inject new capital into the bank. The stock has since fallen to a record low. The bank announced plans to borrow $54 billion from the Central Bank “to proactively strengthen its liquidity,” but that didn’t remedy the situation. Deposit outflows at the end of last week exceeded 10 billion francs a day.
The takeover of rival UBS was pushed by the authorities. UBS offered to buy the troubled bank for $1 billion, but Credit Suisse rejected the offer, as it considered that the amount offered was too small, and such a deal would be harmful to shareholders and employees.
After that, the authorities are considering a full nationalization or transfer to the state ownership of a significant block of shares. UBS later agreed to pay more than $2 billion.
Note the volatility throughout the stock market, including the S&P 500.
Earlier we reported that Swiss regulators said the Central Bank is ready to intervene in the situation with Credit Suisse.
Swiss regulators said the Central Bank is ready to intervene in the situation with Credit Suisse
The financial authorities of Switzerland said that the Central Bank (Swiss National Bank, SNB) will provide additional liquidity to Credit Suisse in case of need, reports CNBC. Credit Suisse meets all capital and liquidity requirements for systemically important banks, the SNB and the Swiss Financial Markets Supervisory Authority said in a joint statement.
The country’s banking regulators say Credit Suisse “meets the capital and liquidity requirements for systemically important banks. If the situation changes, the SNB is ready to step in and provide additional liquidity to the bank. The country’s financial authorities said there was “no direct risk of contagion” for Swiss banks after the bankruptcy of two U.S. banks a week earlier. Credit Suisse said the same day it welcomed a “statement of support” from regulators.
Regulators stated after Credit Suisse’s Swiss-listed shares plunged more than 20 percent on Wednesday, March 15. Credit Suisse’s U.S. depositary receipts were down 14% in the session after the statement from regulators. while European exchanges and trading in the DAX Index, UK 100 and other indices had already closed by this time. The value of stocks of Swiss bank Credit Suisse plummeted during the trading day by almost a third, according to data compiled by Bloomberg.
The price fell to 1.56 francs ($1.7), 30.3 percent less than it was at the close of trading on March 14. The securities later recovered their losses slightly and cost 1.61 francs ($1.74), 28.3% (0.63 francs) less than the closing price the day before. Credit Suisse papers fell to a record low during trading, Bloomberg noted. Trading papers suspended for a time because of too rapid collapse.
Earlier we reported that Moody’s explained why the banking crisis in the U.S. will not affect Asia.
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