The index futures cut their losses and traded in the green on Sunday following Swiss investment bank Credit Suisse AG’s CS sale to its peer UBS Group AG UBS. Also, on Sunday, five central banks from both sides of the Atlantic collectively announced measures to ease the strain on the global funding market.
At the time of publication, Nasdaq Futures were up 0.33%, while S&P and Dow Futures were moving 0.39 % and 0.32% higher, respectively. Meanwhile, Australia's S&P/ASX200 index was down 0.76% and New Zealand's S&P/NZX 50 Index was down 0.67%. Hours later, Asian markets were mostly down once they opened: The Nikkei 225 Index dropped 0.38% and the Hang Seng Index fell 0.85%. The Shanghai Stock Exchange Composite Index, however, was up 0.12%.
What Happened: Credit Suisse, which had been wading through troubled waters as a result of scandals and litigations, could not get its house in order — despite a restructure, other initiatives undertaken by the company and support from the Swiss National Bank.
With the crisis precipitating, Swiss National Bank was forced to intervene to avert yet another major bank collapse. The central bank roped in a reluctant UBS, with promises of support.
On Sunday, UBS announced a deal to buy the ailing Credit Suisse for $3.2 billion at a per-share price equivalent to $0.82, a 60% discount from Friday’s closing price.
The Credit Suisse sale comes amid considerable strain on regional banks in the U.S. First Republic Bank FRC, for example, saw its fundamentals suffer following the collapse of Silicon Valley Bank and Signature Bank.
The U.S. Department of Treasury and Federal Reserve subsequently stepped in and prodded the big banks to create a rescue package for the First Republic.
Hedge fund manager Bill Ackman tweeted over the weekend that Goldman Sachs Group, Inc. GS could potentially buy First Republic Banks. Reports suggested that billionaire investor Warren Buffett has also been in touch with Washington to help with the banking crisis.
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Meanwhile, global central banks, including the Federal Reserve, the Bank of Canada, the Bank of England, the the European Central Bank, and the Swiss National Bank, announced their decision to enhance the provision of liquidity through the standing U.S. dollar liquidity swap line arrangements.
In the week ending March 17 (which saw volatility amid continuing headlines on the banking sector), the S&P 500 and Nasdaq Composite indices rose 1.43%, and 4.41%, respectively. On the other hand, the Dow Industrials posted a modest weekly loss of 0.15%, dragged lower by weakness in the banks.
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