Shares in Credit Suisse sank again on Friday while futures linked to First Republic Bank also tumbled as markets failed to take comfort from the rescue package arranged for the troubled US lender.
The renewed concerns dragged down stocks more broadly, taking the gloss off an early-morning rally.
Credit Suisse gave up early gains to trade 11 per cent lower even as the Swiss National Bank pledged liquidity support to the lender on Wednesday. Meanwhile, in pre-market trading, First Republic was down 12.5 per cent.
The Euro Stoxx Bank index, which experienced major sell-offs during the week, had risen as much as 2.3 per cent in early trade but fell back to trade 0.1 per cent lower in the early afternoon.
The broader Stoxx 600 was down 0.4 per cent, while Germany’s Dax fell 0.5 per cent. France’s Cac 40 dipped 0.6 per cent, while the UK’s FTSE 100 was also flat.
US futures were mixed following news that First Republic will be shored up by a consortium of banks that will inject $30bn into the lender. Contracts tracking the S&P 500 fell 0.2 per cent and the tech-heavy Nasdaq was up 0.1 per cent.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will each deposit $5bn. Goldman Sachs and Morgan Stanley will each put in $2.5bn while BNY Mellon, PNC Bank, State Street, Truist Bank and US Bank will deposit $1bn each. The S&P 500 on Thursday recorded its biggest one-day increase since January.
“US intervention at the weekend is helping to limit contagion fears. What the market is telling us is that this is not systemic, but it is fundamentally hard to assess because [there is] no long-term solution for the time being,” said Nadège Dufossé, global head of multi-asset at Candriam.
Sovereign debt markets were muted as investors continued to weigh central banks’ appetite to raise interest rates to combat inflation, while there was uncertainty in the banking sector.
The European Central Bank on Thursday announced its decision to raise interest rates by 50 basis points but it ditched a previous commitment to keep “raising interest rates significantly at a steady pace”.
Yields on two-year US Treasury bills, which are most sensitive to interest rate expectations, rose 0.02 percentage points to 4.11 per cent and 10-year note yields fell 0.08 percentage points to 3.5 per cent.
Two-year Bund yields fell 0.02 percentage points to 2.54 per cent and 10-year contracts were down 0.05 percentage points at 2.19 per cent.
The ECB’s decision has strengthened bets that the Federal Reserve will press forward with a 25bp rate increase next week, instead of a pause. Investors are pricing in a 77 per cent chance of a quarter percentage point rise.
Asian markets advanced, having also been dragged down this week by fears of a banking crisis. Japan’s Topix rose 1.2 per cent, South Korea’s Kospi gained 0.7 per cent and Australia’s S&P/ASX 200 was up 0.4 per cent. Hong Kong’s Hang Seng and China’s CSI 300 climbed 1.6 per cent and 0.5 per cent respectively.
In currency markets, the dollar index, a measure of the greenback against six peer currencies, fell 0.1 per cent. The euro rose 0.1 per cent and sterling was up 0.1 per cent.
The price of bitcoin has advanced 33 per cent this week. The cryptocurrency has gained momentum after US authorities said that deposits at Silicon Valley Bank and Signature Bank would be guaranteed. Both banks served crypto clients and built specialist payment networks to handle conversions between dollars and digital tokens.
Brent crude rose 0.3 and its US equivalent West Texas Intermediate gained 0.6 per cent after they slumped to their lowest prices in more than a year on Wednesday.
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