(News Bulletin 247) – Wall Street should open lower Thursday morning following the setbacks of the Californian bank PacWest, which revive fears of new failures within the American financial sector.
Half an hour before the opening, the ‘futures’ contracts on the major New York indices yield between 0.1% and 0.2%, announcing a continuation of the downward movement of the last few days.
The feeling that the banking crisis that appeared in March with the bankruptcy of the Silicon Valley Bank is still continuing to claim victims is fueling investor mistrust and weighing on the entire financial sector.
The difficulties of Pacific Western Bank, a small bank based in Los Angeles, came on top of the dismay caused earlier this week by the announcement of the emergency takeover of First Republic by JPMorgan.
The title PacWest still lost more than 41% in pre-market quotations this Thursday morning after having seen its course divided by five since the beginning of the year.
It is likely that all eyes will remain on banking stocks today, in order to know if the problem is about to be solved or if the crisis of confidence is likely to worsen further.
At Jupiter AM, we simply recommend not betting on banks in the current environment.
Phil Macartney, European equity investment manager, says bank stocks ‘carry more risk than reward and should be avoided, even in good times’.
The fears revived by PacWest and the possibility of a domino effect within the sector encourage a decline in assets deemed safer, such as government bonds or gold.
The yield on ten-year US Treasury bonds fell below the 3.40% threshold, while gold returned to historic highs at 2,045.9 dollars an ounce (+0.4%).
Second major reason for concern for investors, they still do not seem to know how to interpret the message delivered yesterday by the Federal Reserve.
“The Fed is probably close to its maximum key rate, but we do not rule out the probability of a further increase in the future,” recognizes Sonia Meskin, head of US macroeconomics at BNY Mellon Investment Management.
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