Shock in financial market showed no signs of easing on Thursday as investors weighed whether turmoil in the banking industry in the United States and Europe would weigh on the global economy.
Just after midnight in Zurich, Credit Suisse – a “globally systemically important bank” in its own words – said it would tap life-line from the Swiss National Bank and borrow up to $54 billion. Futures on the benchmark Euro Stoxx 50 index jumped more than 2 percent after the news, a sign that battered European shares could bounce back when trading opens later in the day. S&P 500 futures were also higher.
But stocks in Asia were in the red, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index down more than 1 percent. in South Korea, regulators warned lenders to prepare for the fallout from Silicon Valley Bank’s collapse, saying they may order local lenders to provide more capital.
The problems plaguing Silicon Valley Bank and Credit Suisse, reeling from years of mismanagement, are very different. However, their struggles have raised concerns that there are more unseen risks in the financial industry. For many investors, the next trigger may come in a few hours, at the meeting of the European Central Bank in Frankfurt.
The bank was set to raise interest rates again to counter rising prices. But the calculus changed within days after three banks in the United States collapsed in less than a week, in part because they underestimated the impact of rapidly rising interest rates.
“With the emergence of companies and financial institutions unable to withstand a rapid rise in interest rates, the ECB now faces the same situation as the US authorities, having to choose between tackling inflation and stabilizing the financial system,” Yunosuke Ikeda, an analyst at Nomura. Bank of Japan, wrote in a report on Thursday.
Jin Yu Young contributed reporting.