Thousands of miles from US shores early Wednesday morning, a headline began working its way across Europe, then Wall Street, sparking fresh panic as it dawned on investors that they might be facing another banking crisis. His comments sparked a sell-off, spreading from European banks to U.S. stock index futures, with the Dow Industrials DJIA, -0.87% down more than 500 points early Wednesday. The sell-off appeared to end a brief respite for markets after days of stress in the US banking sector that began with the collapse of Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank. Swiss authorities said in a statement that Credit Suisse met the capital and liquidity requirements imposed on systemically important banks, but the national bank would provide additional liquidity if needed. On Wednesday night, Credit Suisse said it would borrow up to $54 billion from the Swiss central bank, calling it a “decisive step” to calm investors. And for US investors who have felt enough anxiety lately, a logical question to ask is how could a downturn for Swiss banks hurt their portfolios? “I don’t think there’s any direct consequence for US investors, but if a big Swiss bank fails it’s extremely negative for sentiment, hot on the heels of SVB/SBNY,” said Simon Rhee, founder of the Tao of Trading Options Academy school and namesake. the book’s author, told MarketWatch. “The market will (temporarily) wonder who is next. “It could start to have the optics of a global banking crisis, rather than the idiosyncratic failure of a specific US regional bank,” Rhee said. The Stoxx Europe 600 banking sector SX7P, -6.92% tumbled 7%, with the biggest regional losses centered on Switzerland, followed by Spain. and bank-heavy countries in Italy. Among U.S.-listed banking stocks, Credit Suisse stock CS, -13.94% echoed Zurich’s losses, while Deutsche Bank DB, -6.75% fell nearly 10% and Banco Santander SAN, -5.79% fell 9%. Still, some would say Credit Suisse may be skating on thin ice. It’s no surprise. The Swiss bank has begun a turnaround as it has lost five straight quarters, with a painful legacy that includes billions worth of the collapsed Arcagos family office. The exposure includes and has been forced to freeze $10 billion worth of funds tied to Greensil Capital. The bank released its belated annual report on Tuesday in which it acknowledged weaknesses in financial controls for what might happen next, lifeline US re on Sunday. The guarantors could provide a lining to Silicon Valley Bank, Signature Bank depositors, and Credit Suisse in future distressed depositors. For his own bailout, say some. “Despite Credit Suisse’s protests, it appears inevitable that the Swiss National Bank (SNB) will have to intervene and provide a lifeline. The SNB and the Swiss government are fully aware that a failure of Credit Suisse or even a loss to deposit holders would damage Switzerland’s reputation as a financial centre,” said Ottavio Merenzi, CEO of Opimas, a management consulting firm focused on global capital markets. In a note to customers. Marenzi said Switzerland’s “reputation for economic stability and a safe haven for wealth, which is so important to the country’s success in wealth and wealth management, is already suffering incalculable losses,” he said. And falling bank share prices and rising yields on bonds “eerily mimic the recent collapse of Silicon Valley banks. In terms of deposit outflows, Credit Suisse’s position looks worse,” Merenzi said. One-year senior credit-default swaps on Credit Suisse , basically the cost of banks’ insurance against near-term defaults, rose to about 1,200 basis points on Wednesday from 835.9 basis points on Tuesday, Bloomberg reported, citing sources. ” was the author of, who told Business Insider on Tuesday that Credit Suisse’s high exposure to bond assets was worrisome. There? Stephen Innes, managing partner at SPI Asset Management, told MarketWatch that US investors need to watch the situation carefully. If “the kind of reaction that SVB has in the markets If done as received, CS has a much larger footprint in global markets; so I don’t think this is something is that can ringfence investors,” said Innes. The bank “may be forced to sell more securities to cover potential runs on large institutional deposits in light of what’s going on in the broader markets,” he said, adding that gold may look like a better hedge right now. Fresh worries about Credit Suisse may have crashed the party for European stocks and investors who have enjoyed a better performance than US stocks. The Stoxx Europe 600 index SXXP, -2.92% is up 2.8% for the day, versus a 0.7% gain for the S&P 500 SPX, -0.70% . Analysts at Morgan Stanley say better European economic data, easing energy prices and the fact that the region is better equipped for China are the reasons for the recent outperformance. and the US And as global investors watch how Credit Suisse’s problems play out, they will also be closely watching Thursday’s European Central Bank meeting, where economists say market expectations of a half-point rate hike are no longer a certainty. Trading’s Rina Tao said being a bystander to the current banking stress isn’t the worst place to be right now. “There is a time to add risk and a time to manage risk. Today is the time to manage risk. I am very content to be patient and see how things develop. “The SVB failure highlights the potential for other skeletons hiding in the closet and the market will spend the next few weeks/months looking for them. “The extreme volatility we’ve seen in the bond market over the past 5 days also renders any attempt to value other asset classes unnecessary,” he said. Some are now predicting a full percentage rate cut by the end of the year in the wake of the banking sector slowdown. Samantha LaDuc, founder of LaDucTrading.com, said that’s on her advice (which she shared with MarketWatch in February did) that investors are “paid to wait” by staying in cash. Read: Looking for a place for your cash? Grab this 5% CD while you still can. “I am literally recommending and tweeting to customers that we are being paid to wait up to 5% in T-bills. [the] The bond market can sense whether we have a recession or not. All of what happened last week pushed the risk of a recession,” she told MarketWatch. As of November 2022, she says she sees “unattractive risk-reward for stocks or bonds.” Opimas Merenzi, from Credit Suisse for Wall Street, said The threat was simple: “You mean American investors who don’t own any non-American stocks and don’t have passports and can’t find Switzerland on a map and who think it’s a little weird who speaks any language other than English. Need to worry? Not much, other than contagion spreading and causing a meltdown in the U.S. banking system again,” he told MarketWatch.
