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Global Equities Rise as Banks Inject Cash into US Lender and Swiss National Bank Supports Credit Suisse

Strategic Insights

— 2 min read

Global markets breathed a sigh of relief yesterday as a group of large banks infused cash into struggling US lender First Republic Bank and the Swiss National Bank provided a lifeline to Credit Suisse. The European Central Bank (ECB) pressed forward with a 50-basis-point rate hike, despite recent turmoil in financial markets. European and US bond yields rose, while oil prices snapped a three-day rout. Spot gold prices edged up.

Key Takeaways:

  • First Republic Bank's shares jumped nearly 22% before trading was halted, as several large banks were said to be in talks to deposit billions of dollars to salvage the embattled lender.
  • Credit Suisse's shares spent most of the day up around 20% after the Swiss National Bank (SNB) swooped in with support.
  • The ECB's 50-basis-point rate hike was described by President Christine Lagarde as a 'robust decision' to bring inflation back under control.
  • Markets are pricing in a 25-basis-point rate hike by the Federal Reserve next week, despite the potential for economic destruction.
  • Edward Moya, senior market analyst at Oanda, warned that the US economy was experiencing a 'slow-motion train wreck' due to the effects of rate hikes.
  • The MSCI world equity index gained 1.27%, with Europe's STOXX 600 closing the day 1.3% higher.
  • The banking sector index gained more than 1% after bouncing back from an intraday drop following the rate hike.
  • The SNB confirmed that it would provide 'liquidity' to Credit Suisse, which said it was taking 'decisive action' and would borrow up to 50 billion Swiss francs.
  • Stefan Gerlach, chief economist at EFG Bank, warned that the risk level in the financial system increased whenever central banks raised interest rates by hundreds of basis points in a short period.

Statistics:

  • The Dow Jones Industrial Average rose 371.98 points, or 1.17%, to 32,246.55.
  • The S&P 500 gained 68.35 points, or 1.76%, to 3,960.28.
  • The Nasdaq Composite gained 283.23 points, or 2.48%, to 11,717.28.
  • The MSCI world equity index gained 1.27%.
  • European bond yields rose, with Germany's 2-year bond yield rising to 2.616% and the yield on benchmark 10-year Treasury notes rising to 3.5789%.
  • The two-year yield, which rises with traders' expectations of higher Fed policy rates, touched 4.1635%.
  • The dollar index was down at 104.44.
  • The euro was up 0.3% on the day at US$1.061.
  • Mexico's peso strengthened more than 1% against the US dollar in afternoon trading.
  • Oil prices jumped, with Brent crude futures rising US$1.37, or 1%, to settle at US$74.70 a barrel.
  • Spot gold prices rose 0.03% to US$1,918.63 an ounce.

Sources:

  • Bloomberg
  • Reuters
  • CNBC
  • The Wall Street Journal

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