Credit Suisse Gets Booked by Investors
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Credit Suisse plunged 12.4%, hitting a record low, on reports that the bank is sounding out investors for fresh cash. Credit Suisse has taken pole position in a race to the bottom among big, but weak, European banks. For some time, Deutsche Bank has held the dubious title of the lowest-valued big European bank, based on price/book value. This is a ratio of a bank's share price to its net worth. When a bank is trading below one on this metric--as are Deutsche Bank, Credit Suisse and a host of other European banks--investors are signaling they think a firm's assets are overvalued, its liabilities are undervalued, it will destroy value going forward, or some combination of all three. The past week has brought further pain to Credit Suisse's already beleaguered share price as investors debate whether it will have to raise additional capital for a restructuring. That caused its price/book ratio to fall markedly below that of Deutsche Bank, according to FactSet Research data. Credit Suisse is now trading at about 0.23 times book, while Deutsche Bank is at about 0.29. At the start of the year, Credit Suisse traded around 0.5 times book versus around 0.4 times for Deutsche Bank. The upshot for Credit Suisse: the lower its valuation goes, the more difficult, and expensive, it will be for the bank to raise fresh capital.
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The Switzerland stock market ended sharply lower on Friday as worries about a global recession following aggressive interest rate hikes by central banks rendered the mood extremely bearish. The benchmark SMI ended with a loss of 159.87 points or 1.55% at 10,137.78, nearly 50 points off the session's low of 10,091.87. Givaudan, up 2.5%, was the only stock from the SMI index to move into positive territory today. Swiss Life Holding, UBS Group, Alcon, Holcim and Zurich Insurance Group drifted down 3.4 to 5%. Swiss Re, Sonova, Lonza Group, Logitech, ABB, Richemont, Geberit and Partners Group ended lower by 1.3 to 2.7%. In the Mid Price Index, Zur Rose dropped 7.3%. Adecco, Georg Fischer, Temenos Group, Julius Baer, Helvetia, Clariant, Baloise Holding and Flughafen Zurich lost 2.5 to 4%.
European stocks tumbled on Friday. The pan European Stoxx 600 dropped 2.34%. The U.K.'s FTSE 100 and Germany's DAX both ended 1.97% down and France's CAC 40 fell 2.28%. The sharp interest rate hikes announced by central banks, including the Federal Reserve, the Bank of England, and the Swiss National Bank, have raised concerns the aggressive tightening could hurt growth and push the economies into a recession. The energy crisis in Europe, and the tax cuts announced by the British government added to the woes. In the UK market, JD Sports Fashion, Harbour Energy, Natwest Group, Anglo American Plc, Land Securities, Antofagasta, Glencore, Fresnillo, BP, Shell, Endeavour Mining, Next, B&M European Value Retail and Centrica lost 4 to 7%. In the German market, Continental tanked 9%. Volkswagen, Deutsche Bank, Deutsche Post, Daimler, Fresenius Medical Care, BMW, Bayer, Infineon Technologies, Fresenius, BASF, Porsche Automobil, MTU Aero Engines, Allianz and E.ON lost 2 to 5%. In Paris, Faurecia plummeted more than 11%. Valeo drifted down 10%. Renault, Atos, Air France-KLM, Thales, Carrefour, Michelin, Societe Generale, Vinci, Kering, LVMH, ArcelorMittal, Accor, Saint Gobain and Safran lost 3 to 7%. On the economic front, the Eurozone economic downturn deepened in September with worsening performances in both manufacturing and services with demand easing sharply as a result of the cost of living crisis, flash survey results from S&P Global showed.
A wave of selling in financial markets swept across the globe Friday, with nervous investors forced to again confront the specter of recession. New signs of slowing global growth rocked investments of all sorts. The Dow Jones Industrial Average fell to its lowest level of the year, the dollar surged and short-term Treasury yields jumped. Investors, mulling stubbornly high inflation and unnerved by Russia’s attempts to escalate the war in Ukraine, have fled for the exits this week, driving a concurrent selloff in stocks and bonds alike. Bond yields remained near their highest levels in more than a decade as prices tumbled. The Dow on Friday lost 486.27 points, or 1.6%, to 29590.41, its lowest close since November 2020. The S&P 500 dropped 64.76 points, or 1.7%, to 3693.23. The Nasdaq Composite declined 198.88 points, or 1.8%, to 10867.93. Many investors are bracing for more volatility after the Fed’s commitment to combating inflation grew even clearer this week. The central bank on Wednesday approved its third consecutive interest-rate rise of 0.75 percentage point. U.S. companies including auto maker Ford Motor Co and delivery giant FedEx have issued profit warnings in recent weeks, sparking concerns that inflation and slowing growth are beginning to eat into corporate profits. Earnings have held up better than expected for most of this year, helping underpin markets. ExxonMobil fell 5.3%, Chevron lost 6.5% and Occidental Petroleum fell 5.1%. US carrier FedEx (-3.2%) announced it would raise rates by an average of 6.9% next January and cut costs by billions of dollars to cope with a slowdown in global package shipments. Boeing (-5.4%) reached a deal with US regulators to close the investigation into misrepresentations by its former chief executive following the 737 Max crashes in Indonesia and Ethiopia. Costco Wholesale shares lost 4.3% despite the retailer reporting higher sales in the last trading day. The Issaquah, Washington-based group's revenue rose 15% to $72.09 billion in its fiscal fourth quarter.
Stocks in Asia mostly fell on Monday, with Japan’s Nikkei 225 down 2.3%, influenced by car and electronic stocks. The Kospi in Korea declines by 2.5 per cent. Here the focus is on North Korea, which fired a short-range missile into the East China Sea. In Hong Kong and Mainland China, the stock markets are little changed. Shares of casino operators in Macau are in demand, following plans to allow group travel from mainland China again.
U.S. government-bond yields scored weekly gains on Friday, as the policy-sensitive two-year rate set an almost 15-year high and markets adjusted to the likelihood of more interest-rate increases from the Federal Reserve. The yield on the 10-year Treasury fell by 3 basis points to 3.687%. The yield on the 2-year Treasury, which is more sensitive to the hawkish Fed policy, gained another 7 basis points to 4.195%.
Vontobel cuts Givaudan to CHF 3,800 (4,400) - Buy
DZ lowers Airbus target to 93 (111) - Hold
CS lifts BNP Paribas to EUR 75 (74) - Outperform
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