Investors assessed the resilience of the global banking system as US stock futures remained low following the forced takeover of Credit Suisse by the Swiss government by UBS. This move is an important measure governments are taking to prevent an impending crisis in the banking industry.
- Dow Jones Industrial Average futures were down 8 points or 0.03%
- S&P 500 futures fell 0.05%
- Nasdaq-100 futures fell 0.05%
After the collapse of Silicon Valley Bank earlier this month, regional banks were again under heavy pressure to improve their deposit bases.
The financial sector crisis of the past two weeks has raised bets on the Federal Reserve’s interest rate. According to data from CME Group, which uses Fed futures contracts, there is a 56.7% chance the Fed will raise the rate by a quarter point in the morning. The remaining 37.6% are in the bear camp, hoping that Chairman Jerome Powell can start to ease his aggressive moves that began in spring 2022.
UBS has agreed to buy Credit Suisse for 3 billion Swiss francs, combining the bank with $5 trillion in assets. Credit Suisse shares fell 20.3% last week. After UBS declared it would take control, the Fed connected with many other central banks to create a shared liquidity plan. The Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank have agreed to increase the amount of US dollar swaps available on a daily basis.
First Republic shares plunge 16.3% in premarket trading
First Republic shares fell 16.3% before trading on Monday. The downward trend also began after a group of banks agreed on Thursday to temporarily pause $30 billion in deposits at the San Francisco facility for at least 120 days. Last week, the SPDR Regional Banking ETF fell 13.4%.
Despite fears surrounding bank stocks, the Nasdaq Composite closed higher on the week as investors initially returned to technology stocks that can take advantage of low interest rate offers. Meanwhile, the Dow Jones fell 0.16% for the week.
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