UBS purchases Credit Suisse for US$3.25bn

 

Stocks fell Friday as investors pulled back from positions in First Republic and other bank shares amid lingering concerns over the state of the US banking sector.

Banks in the US, Europe and Japan have collectively lost $459bn in market value so far this month — the 16 per cent fall is the sharpest slump since March 2020 .

Over the weekend, UBS has agreed to purchase Credit Suisse for $3.25 billion after Swiss regulators intervened to prevent a crisis from spreading across the global financial markets.

The deal comes after a five-day effort by the Swiss establishment to end a deepening crisis at Credit Suisse that threatened to topple the country's second-largest lender. Despite the Swiss National Bank's emergency credit line, the share price continued to plummet due to the sudden collapse of California-based Silicon Valley Bank earlier this month.

It looks like a repeat of last week ahead for markets – more fear, loathing, desperation, safe havens and a rate rise from the US Federal Reserve.

The causes – the same as last week – the global banking crisis – especially in Switzerland and the US; central bank meetings, led by the US Federal Reserve and the Bank of England – all enough to add to speculation and market volatility.

On Friday the Dow Jones Industrial Average lost 384.57 points, or 1.19 per cent, to close at 31,861.98 points. The S&P 500 slid 1.10 per cent to end at 3,916.64 points, while the Nasdaq Composite was down 0.74 per cent to 11,630.51 points.

Bank stocks have been closely followed by investors in recent days amid fears that others could face the same fate as Silicon Valley Bank and Signature Bank, which were both closed within the last week. The market has been responding to the latest developments in the sector after regulators said over the weekend that they would backstop deposits in the two banks.

First Republic slid nearly 33 per cent to end the week down close to 72 per cent. That marked a turn from Thursday’s relief bounce, which came when a group of banks said it would aid First Republic with $30 billion in deposits as a sign of confidence in the banking system.

Friday’s nosedive weighed on the SPDR Regional Banking ETF, which lost 6 per cent in the session and finished the week 14 per cent lower.

Despite the down session, the S&P 500 advanced 1.43 per cent this week. The Nasdaq Composite gained 4.41 per cent as investors bet on technology and other growth names ahead of next week’s Federal Reserve policy meeting. It was the best week since Jan. 13 for the tech-heavy index. But Friday’s slide pulled the Dow into negative territory for the week, finishing 0.15 per cent down.

Gold ended up 2.6 per cent, up over 6 per cent for the week for best weekly gain since November.

Bitcoin futures up 6 per cent, earlier rising above $27K for the first time since June.

WTI crude ended down 2.4 per cent, down 13 per cent for the week for worst weekly performance since Apr-20.

Sarepta Therapeutics ‘ stock was plummeting after the Food and Drug Administration said it was seeking input from a panel of independent experts on the biotech’s new gene-therapy drug, but analysts remained bullish, calling the update “surprising” but not negative. It was only about two weeks ago that Sarepta said that the FDA has no plans to hold an advisory committee meeting to evaluate SRP-9001 for treating Duchenne muscular dystrophy, a genetic disorder. But Thursday in a call with analysts Sarepta said the FDA changed its decision as SRP-9001 is one of the first gene-therapy biologics licence applications founded on a surrogate endpoint—a substitute to clinical outcomes.

The Critical Raw Materials Act unveiled by the European Union includes copper and nickel as strategic materials for the first time in order to ensure swift approvals and easier access to capital. Note that the strategic materials list previously focused on more niche minerals such as cobalt, lithium and rare earths. That said, industry groups and firms stated that industrial metals such as aluminium should also be included to ensure there is adequate supply of materials needed for the green transition

On Friday, all S&P500 sectors closed lower. Financials has continued to fall, dropping by over 3 per cent in the session.
 
Futures

The SPI futures are pointing to a 1.4 per cent fall.

Currency

One Australian dollar at 7:35 AM is buying 67.08 US cents..

Commodities

Iron ore futures are pointing to a 0.7 per cent rise.

Gold gained 2.6 per cent. Silver jumped 3.6 per cent. Copper added 0.7 per cent and oil fell 2.4 per cent.

Figures around the globe

Across the Atlantic, European markets closed lower. London’s FTSE fell over 1 per cent, Frankfurt lost 1.3 per cent while Paris closed 1.4 per cent lower.

In Asian markets, Tokyo’s Nikkei added 1.2 per cent, Hong Kong’s Hang Seng gained 1.6 per cent while China’s Shanghai Composite closed 0.7 per cent higher.

On Friday, the Australian sharemarket closed 0.4 per cent higher at 6,995.

Ex-dividends

Adairs (ASX:ADH) is paying 8 cents fully franked
DDH Drill (ASX:DDH) is paying 3.33 cents fully franked
Duratec (ASX:DUR) is paying 1 cent fully franked
HUB24 (ASX:HUB) is paying 14 cents fully franked
McPherson's (ASX:MCP) is paying 2 cents fully franked
NRW Holdings (ASX:NWH) is paying 8.5 cents unfranked

Dividends payable

Endeavour Group (ASX:EDV)
Maxiparts (ASX:MXI)
SHAPE Australia Corp (ASX:SHA)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

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