The First Slice for Thursday, March 16, 2023

U.S. stocks were lower in the final hour of trade Wednesday, as concerns over the health of Credit Suisse sparked renewed banking-sector anxiety. The banking giant was forced to suspend its share buyback program, amid reports of a large bond redemption and potential capital raising.

  • The Dow plunged -280.83 or -0.87%
  • The S&P 500 went down -27.36 or -0.70%
  • The Nasdaq was flat +5.90 or +0.05%

On Wednesday, shares of the Switzerland-based Wall Street bank Credit Suisse tumbled nearly 21% after its biggest backer Saudi National Bank told Bloomberg that it would not provide further financial support for the bank. The news prompted an automatic pause in trading of the bank’s shares on the Swiss market and pressured the rest of the European banking sector. The Euro STOXX banking index dropped 8.2%, with shares of major French banks Societe Generale declining by nearly 12% and BNP Paribas falling 10%.

Credit Suisse’s recent financial statements revealed material weaknesses in financial controls, resulting in the bank has lost money for five straight quarters. This along with the announcement of a withdrawal of $100 billion from wealthy clients in the fourth quarter has placed further strain on the bank.

The impact of these losses was further exacerbated by the news that wholesale prices dropped by 0.1% in February, compared with the 0.3% increase that economists polled by the Wall Street Journal had forecast. The core producer-price index, which excludes volatile food, energy, and trade prices, only went up 0.2%.

Given the current financial state of the bank, it is unlikely that its situation will improve in the near future. This means that the current losses experienced by Credit Suisse and the European banking sector could worsen in the coming weeks and months. As investors assess their portfolios, they are unlikely to be taking on any risks with the bank in the near future…….Click here to read the source article[read more]

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