European markets breathed a small sigh of relief Thursday as beleaguered lender Credit Suisse accepted a loan from Switzerland’s central bank, but investors in Asia were still concerned by turmoil that’s hit the global banking sector in recent days.
Europe’s benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, ticked up 1% in morning trade. The broader Stoxx Europe 600 index rose 0.37%, while London’s bank-heavy FTSE 100 (UKX) was up 1%.
Germany’s DAX (DAX) and France’s CAC 40 (CAC40) rose 0.64% and 0.90% respectively.
Investors were buoyed by Credit Suisse’s announcement that it would borrow up to 50 billion Swiss Francs ($53.7 billion) offered by the Swiss National Bank to “to pre-emptively strengthen its liquidity.”
Markets are waiting with bated breath for the interest rate decision by the European Central Bank (ECB) due later on Thursday. It had been widely expected to hike interest rates by half a percentage point, but this week’s market rout may force a rethink.
US stocks were mixed in pre-market trade, with Dow futures down 0.33%, and the S&P 500 futures down 0.24%, while Nasdaq futures rose 0.14%.
Investors in Asia were more pessimistic. Banking stocks in the region fell Thursday, dragging broader markets lower.
But news that Credit Suisse had taken up the Swiss central bank’s offer of financial support limited the losses. On Wednesday, investors had sent shares in Switzerland’s second biggest lender crashing by as much as 30%.
Japan’s Topix Banks Index, a key index tracking Japanese lenders, tumbled as much as 6.4% in the morning session. It then trimmed some losses and closed 3.26% lower. The index has lost 7.4% so far this week.
In Hong Kong, Standard Chartered (SCBFF) closed down 5.4%. HSBC Holdings (HSBCPRA) ended the day 2.4% lower. Local bank BOC Hong Kong closed down 3.9%.
In South Korea, major lenders Shinhan Financial Group and KB Financial Group declined 2.8% and 1.9% respectively.
“What we are seeing is a definite unraveling of investor confidence across both the tech and banking sectors,” said Clifford Bennett, chief economist at ACY Securities, a Sydney-based online broker. “It is highly unlikely these concerns are going to simply vanish any time soon.”
“Regardless of balance sheets, a loss of confidence by investors and depositors can bring down any bank,” he added.
Japan’s broad benchmark Nikkei 225 (N225) finished the day 0.8% lower. Hong Kong’s Hang Seng (HSI) shed 1.7%. China’s Shanghai Composite edged down 1.1%.
Korea’s Kospi fell as much as 1.4%, but then reversed all losses and closed 0.08% down.
Banking shares were hammered in Europe and New York on Wednesday after shares in Credit Suisse fell to a new record low, with investors already reeling from the rapid collapse of two US banks within a week.
The bank failures had already forced US regulators to take emergency measures Sunday to protect deposits at both lenders: Silicon Valley Bank and Signature Bank.
“Markets could get messy amid the fallout from Silicon Valley Bank’s collapse, alongside ongoing uncertainty over the future path of the global economy and interest rates,” said Marty Dropkin, head of equities for Asia Pacific at Fidelity International.