Futures for the S&P 500 are swinging between gains and losses today as the Swiss government arranged a forced takeover of Credit Suisse by UBS. The lawmakers are trying their best at this stage to put off fires which is in their backyards, and the purpose is to quell any potential crisis that is threatening their banking sector. Traders and investors are hoping for greater action from regulators in order to stop the decline of regional banks. Even after a group of banks promised Thursday to deposit $30 billion for at least 120 days in the troubled San Francisco bank, First Republic shares closed the week down 72%. Last week, the SPDR Regional Banking ETF (KRE) fell by 14%.
The $3.2 billion purchase of UBS rival Credit Suisse by UBS was announced over the weekend and the deal was very much anticipated by traders and investors when the rout began in the Credit Suisse stock last week. The rout in the stock began when its biggest backer, the Saudi National Bank, refused to provide more liquidity. Credit Suisse and Swiss regulators took additional action, including a loan of up to 50 billion Swiss francs ($54 billion), to ease investor concerns, but the stock price still fell 25.5% by the end of the week.
One share of UBS will be issued to Credit Suisse shareholders for every 22.48 Credit Suisse shares they own under the terms of the acquisition. UBS estimates that the combined bank’s invested assets will total $5 trillion.
S&P 500 and Nasdaq Composite both ended the week higher as investors shifted their focus back to tech stocks in anticipation of a lower interest rate environment, despite concerns about the health of the banking sector. As a whole, the Dow lost 0.15 percent this week. Regional banks remained under pressure to bolster their deposit bases in the wake of Silicon Valley Bank’s failure earlier this month, which kept investors on edge as the week’s trading began.
After two weeks of tumult in the financial markets, Wednesday’s interest rate decision by the Federal Reserve is more consequential than ever. It is widely anticipated that a quarter-point hike by the Fed is expected to take in the Fed’s meeting. Some speculators believe that Jerome Powell may even begin to ease his aggressive tightening campaign that began in March 2022 as such measure is needed to ease off concerns surrounding financial contagion risk.
Here Is Why Gold Price Moving Higher
The precious metal remains in demand and it is trading in positive territory as investors believe that we are not out of the woods yet. There is no doubt that there is less uncertainty in the banking system as the Swiss regulators have increased the odds that every other regulator is likely to follow the same strategy if other banks come under stress, but the fact is that the risk environment is treading on a fragile state. Traders always prefer safe haven in a situation like this as the contagion risk is always very high.
Speaking from the technical price perspective, the price is highly likely to flirt with the 2,000 price level and a break of this price level is going to push the price near its all-time high.
