US stocks fell on Wednesday due to extended pressure upon Credit Suisse in the financial sector.
US30 - Daily Chart
The US30 dropped by 500 points in the first two hours of trading and was testing the lows of Monday as traders fretted about the banking system. This is a crucial level for the US Dow Jones index because the next level of support comes at 29,000. Traders need to be cautious with long positions in the current environment.
Swiss lender Credit Suisse continues to be a problem for the European banking system and could force the European Central Bank to hold off on this week’s previously expected 50bps hike. The cost to insure the debt of Credit Suisse continues to soar and is now “18 times UBS, 9 times Deutsche bank,” according to Bloomberg.
US Banking Turmoil Spreads Into European Region
“If regulators do not handle the Credit Suisse situation well, this will send shockwaves through the whole sector,” said Joost Beaumont, head of bank research at ABN Amro.
“To make matters worse, both sides of the Atlantic have banking issues,” he added.
The European Central Bank will meet tomorrow for an interest rate meeting, and previous guidance had investors expecting a 50bps hike. The bank may soon take extraordinary measures if the current banking turmoil escalates.
Credit Suisse Group’s shares reached another record low as its top shareholder refused to commit to buying more of the troubled company’s stock.
“The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Saudi National Bank Chairman Ammar Al Khudairy told Bloomberg TV on Wednesday. Saudi National Bank is 37% owned by the kingdom’s sovereign wealth fund and is Credit Suisse’s largest shareholder, with a 9.9% stake.