(News Bulletin 247) – Wall Street retreated on Wednesday evening, victim of renewed risk aversion in the face of doubts surrounding the health of the global financial system, a movement amplified by the stampede of the title Credit Suisse in Zurich.
At the end of the session, the Dow Jones dropped 0.87% while the S&P 500 was down 0.7%. The Nasdaq Composite managed to end in the green (+0.05%).
The optimism born at the beginning of the week of the measures taken by the American authorities to avoid a systemic risk following the bankruptcy of SVB vanished on Wednesday with the tumble of Credit Suisse in Europe.
After having fallen by more than 30%, the action of the Swiss bank lost another 18% following declarations by the president of the Saudi National Bank, its main shareholder, excluding any increase in the group’s capital.
‘The biggest concern is that Credit Suisse is inherently a much bigger problem for the global economy than the US regional banks that were in the line of fire last week’, react analysts at Capital Economics.
Credit Suisse’s woes add to a general environment that is not very conducive to risk-taking, overshadowed by the shadow of a new global financial crisis.
Stakeholders wonder whether the difficulties of Credit Suisse, SVB or even Signature might not be the beginnings of a much deeper crisis which had been simmering for months at the bottom of the balance sheets of banks which had mismanaged their risks when the cost of money was zero.
European stock markets reacted strongly to concerns surrounding Credit Suisse’s capitalization, but the declines were less pronounced in New York.
With a decline of 2.4%, banking stocks did not even sign the largest sectoral decline of the day, largely outpaced by the energy (-5.4%) and basic materials sectors.
Fears of a new financial crisis and therefore of a global recession pushed the barrel of American light crude oil down to lowest levels since the end of 2021.
Among the losers of the day are notably the oil services groups Schlumberger (-9%) and Halliburton (-9%), as well as the investment bank Morgan Stanley (-5%), which is very exposed to Europe.
US investors are also keeping an eye on economic indicators, if only to try to guess their implications for the timing of future monetary tightening by the Federal Reserve.
The increase in the producer price index stood at 4.6% in February over one year, against 6% the previous month, confirming the trend towards moderation of inflation in recent months.
Retail sales fell by 0.4% in February, while economists had expected an increase of around 0.2%.
Another indicator, the Empire State, confirmed the scenario of declining economic activity.
Under these conditions, many investors prefer to fall back on assets deemed safer than equities, starting with US Treasury bonds, with a yield on ten-year Treasuries which fell by more than 18 basis points to 3 .4550%.
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