After being acquired by UBS, the AT1 value of Credit Suisse's additional Tier 1 capital bond was unexpectedly cleared. At one point, it triggered market panic. European stocks fell more than 2% at the beginning of the session, yields on European and US bonds plummeted by double digits, and safe-haven demand caused gold to rise above 2,000 US dollars for the first time in a year.
The NASDAQ opened low and moved higher, and the S&P market and the Dow closed near daily highs. The Dow rose nearly 420 points. Credit Suisse's European and US stocks both fell more than 50% and reached new lows. UBS's European stock fell 16% and then turned higher, but the cost of one-year CDS debt default insurance was the highest in 11 years. Major banks in the US turned down at the end of the session, and First Republic Bank fell 50% intraday and broke new lows several times. Liquidity and credit ratings were questioned again. The New York Community Bank, which “picked up the omission” and bought large assets of signature bank in the cryptocurrency industry, rose more than 30% in history, and most banks in other regions rose.
The yield on US bonds fell to a new low of half a year and then turned higher. The two-year yield rose by 4%, and the price of European bonds fell sharply. Oil prices closed up more than 1% after falling nearly 4%, the lowest intraday in more than a year. The US dollar reached a five-week low, the pound was the highest in six weeks, and Bitcoin fell below $28,000 after hitting a nine-month high.
Facilitated by the Swiss government, central bank, and regulators, Switzerland's largest bank, UBS announced the acquisition of Credit Suisse, the country's second-largest bank, for 3 billion Swiss francs. The Federal Reserve immediately announced joint liquidity operations with the central banks of Canada, the United Kingdom, Japan, Europe and Switzerland, with the aim of easing liquidity concerns in global markets and stopping the crisis from spreading to the global banking system. The cost of UBS debt default insurance has soared.
The acquisition gave priority to clearing the value of Credit Suisse's Additional Tier 1 Capital Bonds (AT1) with a face value of about 16 billion Swiss francs. It was the biggest value write-off event in the European AT1 market, which reached 275 billion US dollars. At one point, it severely damaged market confidence. ECB President Lagarde and European regulators immediately reassured that the Eurozone rule is still that equity bears losses before AT1 bonds, and that European stocks stop falling and turn upward.
According to the Chicago Mercantile Exchange's FedWatch, the futures market's bet on the 25 basis point rate hike announced by the Federal Reserve on Wednesday increased to 78%, while the bet on the hold fell from 38% to 22%. Evercore ISI believes that UBS's acquisition of Credit Suisse and the US dollar liquidity guarantee by the Federal Reserve and several major central banks have raised the possibility of interest rate hikes, but Goldman Sachs still cites pressure from the banking industry to expect the Fed not to raise interest rates for the time being this week.
ECB President Lagarde reiterated that the policy depends on data. Inflation is still too high, but market tension has increased the uncertainty of the central bank's expectations. The ECB Governing Council and the Governor of the Bank of Greece bluntly stated that the austerity cycle is nearing its end. Analysts speculate that the Bank of England may not raise interest rates for the time being on Thursday. Meanwhile, the minutes of the Bank of Japan's March meeting anticipate a slowdown in inflation this year and will adhere to ultra-loose monetary policies such as yield curve control.
The NASDAQ opened low and went high, closing near daily highs with the S&P market and the Dow. Credit Suisse's stock price fell short, UBS turned up, and Apple reached a new high in half a year
On Monday, March 20, after UBS “picked up the missing” deal to acquire Credit Suisse over the weekend, investors were still nervous about whether the banking crisis would spread globally and await interest rate decisions from the Federal Reserve and the Bank of England this week. European and American stock markets were volatile and uneasy.
The rise and fall of US stocks was mixed at the beginning of the session. The NASDAQ, which performed better last week and has the majority of technology stocks, opened lower, while the S&P 500 index and the Dow opened higher. The increase of the Dow increased to 1% soon after opening. During the afternoon trading, the NASDAQ rose after several ups and downs, and closed close to daily highs with other stock indexes.
The Dow rose nearly 420 points or 1.3% during the day, returning to the 32,000 point mark, and the S&P 500 index also rose as high as 1%. The NASDAQ fell as deep as 0.7% at the beginning of the session, and rose 0.6% after turning higher. Russell's small-cap stocks rose as high as 2%, the biggest one-day gain in six weeks.
By the close of the market,S&P, Dow, and Russell small-cap stocks all rose on the third day of the six trading days since last Monday, while the NASDAQ and NASDAQ 100 rose on the fifth day in six trading days, and are close to the four-week high since mid-February set last Thursday:
The S&P 500 closed up 34.93 points, or 0.89%, to 3951.57 points. The Dow closed 382.60 points, or 1.20%, to 32244.58 points. The NASDAQ closed up 45.03 points, or 0.39%, to 11675.54 points. The Nasdaq 100 index closed up 0.3%, and the Russell 2000 small-cap index halved to 1.1%.
S&P's 11 sectors closed higher across the board. Among them, the energy and raw materials sector led the way with gains of more than 2%, industry, consumer goods, health care, finance, and real estate up to 1.36%, and information technology/technology, which rose 0.23%, showed the worst performance.
The NASDAQ opened low and moved higher, and closed near daily highs with the S&P market and the Dow
The industry benchmark Philadelphia Stock Exchange KBW Bank Index (BKX) peaked nearly 4% and closed up 0.8%. The SPDR S&P Regional Bank ETF (KRE) peaked by nearly 5% and closed up 0.3%.
Both indices have risen on the third day in the six trading days since last Monday. They both fell more than 14% last week, and hit their four-and-a-half-month lows since the beginning of November 2020 several times. A week earlier, both indices had fallen 16%, the biggest weekly declines since the COVID-19 outbreak in Europe and the US in 2020 and the 2008 Lehman crisis, respectively.
Among large banks,J.P. Morgan, the largest bank by assets in the US, closed up 1% after rising nearly 3%, breaking away from the new low of nearly five months set last Friday. Citi rose more than 3% and then turned down, reaching its lowest level in nearly three months. Bank of America rose more than 2% and then fell 0.3%, hitting a new low of more than two years since November 2020. Wells Fargo rose nearly 2% and then fell 0.7%, setting a nine-month low.
Meanwhile, Morgan Stanley and Goldman Sachs both rose nearly 2%, breaking away from the four-month and five-month lows respectively. However, asset management giant Jiaxin Wealth Management rose more than 6% and then fell 0.5%, falling to a new low of three days in a row.
Among regional banks,First Republic Bank fell by the deepest 50% and collapsed several times. It closed down more than 47%, falling two days in a row to a record low, falling nearly 72% last week, and falling nearly 90% in March. New York Community Bancorp (New York Community Bancorp) closed up nearly 32% after rising 42%, the biggest one-day gain since listing, and close to recovering its March decline.
Western Alliance Bancorp (Western Alliance Bancorp) rose 10% and then fell nearly 7%, hitting a one-week low. After rising 23%, PacWest Bancorp (PacWest Bancorp) closed up nearly 11%, breaking away from its historic low. KeyCorp closed up more than 1% after rising more than 6%, US Bancorp (U.S. Bancorp) rose as high as over 7%, Zions Bancorporation closed up nearly 1% after rising 9%, and Fifth Third Bancorp rose 5%, but they were all not far from a low of more than two years.
Credit Suisse's European stocks fell as deep as 65% and closed down nearly 56%, reaching a record closing low. European stocks fell to 0.66 Swiss francs at the beginning of the session. After falling more than 55%, its US stock closed down 53%, and falling below $1 also reached a record low. Last week, its European stocks and US stocks both fell by more than 20%. The rating agency S&P downgraded Credit Suisse AT1 bonds and placed the company on a watch list. It is expected that Credit Suisse AT1 bonds will default soon.
UBS's European stock rose as high as nearly 7%, and closed up more than 1%. Before turning up, it fell 16%. Its US stock rose as high as 8.6%, closing up more than 3%, breaking away from the three-month low set last Friday. Bank of America raised UBS's US stock rating to “buy”, and it is expected that there is still room for a 36% increase.
UBS's 5-year CDS rose 9% to a five-month high since October last year, and its 1-year CDS rose more than 53%, rising above 100 again since 2012/7/26, indicating that the market is worried about the risk of debt default rising.
According to the news,S&P downgraded Bank First Republic's credit rating to junk for the second time in a week, and remains on the negative watch list. The reason is that deposit injections from large US banks, huge loans from the Federal Reserve and the Federal Home Loan Bank, and the suspension of common stock dividends all indicate that they are facing high liquidity pressure from a large outflow of deposits. On Monday, J.P. Morgan took the lead in discussions on “alternative funding” to help, with the intention of converting deposits injected by large banks into equity capital injections. Flagstar Bank, a subsidiary of New York Community Bank, agreed to buy most of the deposits and 40 branches of Signature Bank, a coin-ring bank that went out of business last week, and used 2.7 billion US dollars to buy part of the 12.9 billion US dollar loan portfolio.
Analysts generally agree that UBS's acquisition of Credit Suisse will help calm the global banking crisis. Investors evaluating the possibility of the US expanding deposit insurance have all helped bank stocks rebound, but policymakers may need to take more action to restore people's confidence in the banking system. Credit Suisse is selling cheaply at a net market ratio of 0.04, raising concerns that a large portion of its assets may have been damaged, triggering a new round of concerns about the health of the banking industry. Coupled with the fact that the value of AT1 bonds unexpectedly preceded the elimination of equity write-offs, it makes it doubtful that Credit Suisse's risk may still spill over.
Ed Moya, senior market strategist at OANDA, pointed out that confidence in the banking industry is still lacking, and European and American stock markets are still fluctuating, because risk aversion will not disappear until the market is convinced that the Fed ends its interest rate hike. Wells Fargo, on the other hand, claimed that the merger of large banks such as UBS and Credit Suisse proved that the biggest capital participants in the European and American banking industry can continue to gain global market share. Goldman Sachs is also optimistic about these “large currency center banks” and changed its overall rating of European bank stocks to “increase holdings,” but it said that the banking situation in the US region is still unstable.
Star technology stocks and chip stocks had mixed ups and downs.Meta, the “metaverse” that rose more than 7% yesterday, rose more than 1%. Amazon closed down more than 1% after falling more than 3%. Apple rose 1.6% to a six-month high since September last year. Microsoft fell 2.6%, Netflix rose 0.5% after falling more than 2%, Google A fell 0.4%, and Tesla's increase was cut in half after rising 3.5%. The Philadelphia Semiconductor Index rose 1%, breaking 3,100 points to a new high of nearly five weeks since February 15.
The decline in the popular China Survey narrowed markedly at the end of the session.The Chinese securities ETFs KWEB and CQQQ fell nearly 1%, and the Nasdaq Golden Dragon China Index (HXC) closed down 1% after falling 4%. Of the NASDAQ's 1004 constituent stocks, JD fell 0.4%, Baidu rose more than 2%, and NetEase closed, but Pinduoduo fell more than 14%. Among other individual stocks, Alibaba fell nearly 1%, Tencent ADR turned up, Station B and NIO Auto rose about 6%, Ideal Auto rose more than 1%, and Xiaopeng Motor rose 3.5%.
According to the news, Netflix said it will launch a new game every month this year. Amazon has laid off another 9,000 employees, and has already laid off more than 18,000 employees in January of this year. Pinduoduo's revenue for the fourth fiscal quarter fell short of expectations, and net profit declined month-on-month. J.P. Morgan claims to have reduced its holdings by about HK$333 million. China's National Press and Publication Administration approved 27 games, with NetEase, Tencent, and Site B on the list.
European stocks opened low and moved higher and closed with a sharp rise of about 1%.The stock indexes of major countries and most sectors resumed their gains before the US stock market. The pan-European Stoxx 600 index closed up 0.98%, and the German and Italian stock indexes both fell 2% at the beginning of the session.
The European bank stock index closed up 1.3% after falling 6%, the Bank of Italy stock index closed up more than 3%. The declines of Deutsche Bank and ING Group of the Netherlands narrowed markedly, and mining stocks rose nearly 3%. According to the analysis, the value of Credit Suisse's high-risk AT1 bonds of 17 billion US dollars was cleared, which caused investors' panic to spread at an accelerated pace at the beginning of the European stock market.
US bond yields rose after falling sharply to a new low of half a year in double digits. The two-year yield rose by 4%, and the price of European bonds fell sharply
Safer buying has weakened somewhat, and US bond yields have rebounded and increased intraday after falling to a new low of half a year since September last year. The decline in European bond yields narrowed markedly at the end of the session, but the cooling of bets on the ECB's interest rate hike caused European short-term bond yields to fall even deeper.
The 10-year bond yield once fell nearly 11 basis points to 3.29%, the lowest since September 12 last year, and the highest increase after turning up was over 10 basis points to 3.50%. The two-year yield, which is more sensitive to monetary policy, once plummeted 21 basis points to 3.635%, the lowest since September 13 last year. After turning up, it rose 18 basis points and tried to break the 4% mark.
Last week, 10-year US Treasury yields fell more than 30 basis points, and two-year yields fell more than 70 basis points. The banking crisis caused investors to flock to safe-haven assets. “The New Debt King” and CEO of Double Tier Capital, Kang Rak, said that the banking crisis is still spreading, and US bond yields have not yet bottomed out. He also warned, “The curve is rapidly becoming steeper after continuing to reverse for a period of time, which strongly suggests that the economy will soon recession.”
After the ECB and the Bank of England clarified the order in which AT1 bonds were paid, the price of European bonds rose and fell back. The Eurozone benchmark 10-year German bond yield turned upward at the end of the session. At the beginning of the session, it fell 20 basis points to 1.92%, the lowest in three months since mid-December last year. The two-year yield fell 3 basis points at the end of the session. At the beginning of the session, it fell more than 30 basis points and fell below 2.10%, which was also the lowest in three months.
Oil prices rebounded in a V-shaped manner. After falling nearly 4%, they closed up more than 1%. Intraday hit a new low of more than a year, and European gas fell by about 9%
Risk appetite is insufficient. The price of oil, which is a risk asset, fell 4% in the intraday period, and rose at the end of the session amid optimism that China led to boosting demand. WTI's April crude oil futures closed up $0.90, or 1.35%, to $67.64 per barrel. Brent crude oil futures for May closed up $0.82, or 1.12%, to $73.79 per barrel. According to the news, the G7 will postpone revising the Russian oil price cap this week.
US oil WTI's April futures fell as deep as 2.62 US dollars or 3.9%, and the daily decline hit 64 US dollars. US stocks rose more than 1% after midday trading and reached 67 US dollars. May futures, which were more actively traded, fell as deep as $2.55, or 3.8%. The daily low also fell below $65, the lowest in more than a year since the end of November 2021, and returned to 67 US dollars after a rebound in the rise. International Brent fell as deep as 2.84 US dollars or 3.9%. The daily decline pushed the psychological figure of 70 US dollars, the lowest since late December 2021, and rose again to 73 US dollars after a rebound.
Dutch TTF Gas and ICE British Gas, which are European benchmarks, both fell about 9% at the end of the session. Dutch futures fell below the €40/kcal mark, hitting a new low of one and a half years since August 2021. US NYMEX gas futures for April fell nearly 5% to a new low of more than two weeks.
The US dollar index reached a five-week low, the pound was the highest in six weeks, and Bitcoin fell below $28,000 after hitting a nine-month high
Demand for safe haven declined. The DXY dollar index, which measures a basket of six major currencies, fell as deep as 0.4% to 103.30, hitting a five-week low since February 15. It fell by 0.7% last week.
The euro rose 0.5% against the US dollar and returned to 1.07, close to a one-week high. The pound rose nearly 1% against the US dollar, breaking 1.22 and rising to 1.23, hitting a six-week high since February 2. The yen once rose 1% against the US dollar, and US stocks fell back below 131 in the intraday period, and the increase narrowed to 0.3%. The offshore renminbi rose above 6.88 yuan against the US dollar, up nearly 170 points or 0.2% from the previous day's closing high, to a one-week high.
Gold has surged 9% this year, but Bitcoin has soared more than 70%. According to some analysts, the reason for Bitcoin's recent surge is that some investors have switched to digital currencies during the traditional banking crisis, and they are still worried about the spread of the crisis in the traditional banking sector.
There is still safe-haven demand and the market lowered interest rate hike expectations. Gold rose above 2,000 US dollars for the first time in a year, and Luntong, lead, and tin rose 1%
COMEX April gold futures closed up 0.47% to 1982.80 US dollars/ounce, once pushing up 2015 dollars. Gold futures closed 0.48% higher in June to 1999.70 US dollars/ounce, and at one point hit 2,032 US dollars. Spot gold once rose above the $2,000 psychological threshold for the first time since March of last year, indicating that there is a certain degree of safe-haven demand in the market.
Spot gold rose above $2,000 for the first time in a year and turned down
The lower dollar caused most industrial basic metals in London to close higher:
Luntong rose 118 US dollars or 1.4%, reaching a one-week high of 8,600 US dollars. Lunalu closed down, not far from a two-month low. Renzin fell slightly, breaking away from a one-week high. Lunlead rose 1.3% and rose above 2,100 US dollars, a two-week high. Renzi rose 1%, further away from the nearly four-month low. However, Lunnickel fell 2.4% and fell below 23,000 US dollars, close to the four-month low set a week ago.
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