Swiss regulators have stepped in to reassure global financial markets after fresh fears about Credit Suisse’s viability threatened further consequences just days after two historic failures of US banks.
He Swiss National Bank issued a statement on Wednesday night it offered the struggling lender financial support if needed, a move that helped markets pare some of the day’s heavy losses.
Credit Suisse shares closed down 14% in US trading. Other bank stocks were also affected, with JPMorgan closing down 4% and Wells Fargo and Goldman Sachs closing around 3%. Bank of America closed with losses of less than 1%.
The broader Dow Jones industrial index ended the session on Wednesday down about 280 points, or about 0.9%, while the S&P 500 closed down 0.7%. The high-tech Nasdaq ended the day largely unchanged.
Analysts said the turmoil increased the likelihood that the Federal Reserve will not raise interest rates aggressively when it meets next week, even as inflation remains high.
The risk of further roiling markets “makes it more likely they will stop raising rates,” Pantheon Macroeconomics chief economist Ian Shepherdson wrote in a note to clients late Wednesday. «It is more important, from our point of view, not to take risks with the stability of the system than to reaffirm its determination to fight inflation.»
The widespread fallout on Wednesday was sparked in part when Credit Suisse’s largest shareholder, the Saudi National Bank, said it had discarded adding to your existing investments to help stabilize the embattled lender.
Credit Suisse shares had it plunged as much as 25% in morning trading, and the turmoil quickly spread throughout the banking sector and beyond. Even traditionally safer assets, including US government bonds, took a beating, although yields began to rise before markets closed.