Federal Reserve Rolls Out Emergency Measures to Prevent Banking Crisis
Topic of the day
U.S. regulators took control of a second bank Sunday and announced emergency measures to ease fears depositors might pull their money from smaller lenders after the swift collapse late last week of Silicon Valley Bank. The measures, which include guaranteeing all deposits of SVB, were designed to shore up wavering confidence in the banking system. They were jointly announced Sunday night by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. Regulators announced they had taken control of Signature Bank, one of the main banks for cryptocurrency companies, on Sunday. The New York bank’s depositors will be made whole, officials said. A senior Treasury official said the steps didn’t constitute a bailout because stock and bondholders in SVB and Signature wouldn’t be protected. The Fed and Treasury separately said they would use emergency-lending authorities to make more funds available to meet demands for bank withdrawals, an additional effort to prevent runs on other banks. “This should be enough to stop the depositor panic,” said William Dudley, who served as president of the New York Fed from 2009 to 2018. “What it tells you is that risks to the financial system are not just tied to the big money-center banks.” Officials took the extraordinary step of designating SVB and Signature Bank as a systemic risk to the financial system, which gives regulators flexibility to guarantee uninsured deposits. Officials said that depositors at SVB will have access to all of their money on Monday. In a separate statement Sunday night, the Fed said it “is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses and will take additional steps as appropriate.”
Looking for New Structured Product Ideas?
On Friday, the SMI lost -1.7 per cent to 10,765 points. All 20 SMI stocks finished lower. 89.4 (previously: 52.29) million shares were traded. Among the financial stocks, Credit Suisse fell by 4.4 per cent, UBS by 4.4 per cent and Partners Group by as much as 6.2 per cent. Among insurers, Zurich Insurance tumbled 3.1 per cent and Swiss Re shed 2.7 per cent. Other shares were also caught up in the wave of selloffs. 13 of the 20 SMI stocks suffered losses of more than 2 per cent. ABB (-3.8 per cent), Alcon (-3.7 per cent) and Logitech (-3.3 per cent) saw a particularly sharp decline. The SMI weakness was reduced by the heavyweights, which held up relatively well, especially Nestle (-0.2%) and Roche (-0.2%). Outside the SMI, however, there were also winners. U-Blox's figures for 2022 as well as the outlook for the current year were positively received, with the share price rising by 11.5 per cent. UBS analysts highlighted the 2022 EBITDA, which was 13 per cent above market expectations. In addition, the microchip company expects an EBITDA margin of 21 to 24 per cent in the current year, where the market has so far assumed the lower end of the range. In terms of sales, the company is considerably more optimistic than the analyst consensus at plus 6 to 16 per cent.
The European stock markets slumped on Friday, led by a decline in banking stocks following Silicon Valley Bank's woes in the United States. These concerns overshadowed the release of the monthly US jobs report, which prompted the market to revise its expectations for the Federal Reserve's (Fed) next monetary policy decision. The Stoxx Europe 600 index lost 1.4% to 453.8 points. In Paris, the CAC 40 and the SBF 120 were down 1.3% each. The DAX 40 index in Frankfurt gave up 1.3% and the FTSE 100 in London fell by 1.7%. For the week as a whole, the Stoxx Europe 600 dropped 2.3%. Banks suffered from the setbacks of SVB Financial Group, the parent company of Silicon Valley Bank. In Paris, Société Générale and BNP Paribas shed 4.5% and 3.8% respectively. Crédit Agricole SA dropped 2.5%. In Germany, Deutsche Bank plunged 7.4%. British bank Barclays declined by 3.7% and Spain's Banco Santander fell by 4.2%. In Milan, UniCredit decreased by 3.1% and Intesa Sanpaolo by 4.2%. The retail group Casino (-5.6%) reported a weak performance for the year 2022. Hydrogen production and distribution equipment specialist McPhy Energy (-1.9%) will leave the SBF 120, Euronext indicated at its quarterly index review. This change will take effect from the 20 March session. On the same date, the boat builder Beneteau (-1.2%), the electrical specialities and advanced materials group Mersen (-0.7%) and the renewable energy producer Voltalia (-0.8%) will join the SBF 120.
Stocks tumbled as investors ran for safe havens on Friday, unnerved by concerns about the health of the U.S. financial system and a still-strong jobs report. The selloff deepened after regulators shut down Silicon Valley Bank, marking the largest bank failure in the U.S. since 2008. Bond yields tumbled. The S&P 500 closed down 56.73 points, or 1.4%, at 3861.59, while the blue-chip Dow Jones Industrial Average fell 345.22 points, or 1.1%, to 31909.64. The Nasdaq Composite lost 199.47 points, or 1.8%, to close at 11138.89. Several banks were among the worst performers in the stock market, including PacWest Bancorp, which plunged 38%, and Western Alliance Bancorp, which fell 21%. Signature Bank, First Republic Bank and Charles Schwab Corp. were the three worst performers in the S&P 500, all tumbling more than 10%. SVB’s woes have highlighted a consequence of rising interest rates for some lenders. The four banking giants, JPMorgan, Bank of America, Citigroup and Wells Fargo, wiped out nearly $52 billion in combined market capitalisation on Thursday after SVB shares fell 60%. On Friday, BofA lost 0.9%, Citi gave up 0.5%, and Goldman Sachs fell 4.2%. JPMorgan, however, gained 1.1%. Oracle shares shed 3.2% as the business software company reported higher but lower-than-expected revenue in its third quarter. DocuSign plunged 22% following warnings of a deteriorating economic environment. Gap declined by 6%. The apparel chain reported a larger-than-expected loss in the last quarter as its revenue decreased by 6% in the period. Walt Disney (-2.7%) apparently plans to raise prices again on its Disney+ platform and sell the rights for some programmes to competitors to achieve profitability in streaming.
Asian stock markets are trading mixed on Monday, following the broadly negative cues from global markets on Friday, as traders remain cautious and assess the fallout of the biggest US bank failure since the 2008 financial crisis. Japan’s Nikkei 225 index shed 1.4 per cent. The index is burdened by a stronger yen, which puts pressure on the shares of export stocks. Nissan Motor lost 5.3 per cent and Mitsubishi Motors 7.2 per cent. Financial stocks are also under pressure: Sumitomo Mitsui Financial Group is down 4.5 per cent and Mizuho Financial declines by 5.4 per cent. The Chinese stock exchanges, meanwhile, are showing gains.
U.S. government debt yields slipped on Friday after the release of the employment report. The 2-year Treasury yield posted its biggest drop since 2008, as investors flocked to the safety of government debt on growing contagion fears fueled by the collapse of California’s Silicon Valley Bank. The 10-year Treasury note fell by 20 basis points to 3.705% while the 2-year Treasury note dropped 28 basis points to 4.595%. Six Swiss Confederation bonds were reported at lower prices. The yield of two-year Confederation bonds was last quoted at 1.049% and those of the ten-year bonds at 1.346%.
Baader increases target Lindt & Sprüngli to CHF 9,700 (9,600) - Reduce
UBS lifts Holcim target to 63 (51) CHF - Neutral
Stifel raises Inficon target to 865 (780) CHF - Hold
Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.