During the 2008 crisis, subprime mortgages caused the failure of 25 banks, including giants such as Washington Mutual and Lehman Brothers. Recently, US regional banks like Signature Bank, Silvergate Bank, and Silicon Valley Bank also collapsed, while European big bank Credit Suisse struggles with liquidity crisis. These events raised contagion concerns in the European banking sector, with Credit Suisse now planning to borrow up to CHF 50 billion from the Swiss National Bank. However, if the soft bailout is perceived as an opportunity rather than a cautionary measure, Credit Suisse's eventual collapse could lead to a Lehman moment.
EQUITY
US stocks closed lower on Wednesday due to Credit Suisse's banking crisis fears. US-listed shares of Credit Suisse hit a record low, and US retail sales fell 0.4% from 3% growth a month earlier. U.S. Treasury yields fell on Thursday but took a sharp turn. Traders were expecting equal chances of a 25-basis-point rate hike and a pause, but the odds favour a hike now that the yield rises.
GOLD
Gold prices fell from a six-week high as investors took profits, but fear of a banking crisis and uncertainty over monetary policy kept gold's safe haven appeal high. A rate hike pause may benefit the gold market, as it will shift investors' interest to rate cuts instead, and the possibility of a pause is at 34%.
OIL
After reaching 15-month lows, oil prices have slightly rebounded. The market is still fragile due to concerns about a deepening banking crisis that could affect international trading overall. Although OPEC has predicted higher oil demand from China, oversupply concerns persist as Russia escalates its aggression against Ukraine. Higher interest rates could decrease oil demand, but concerns about the banking crisis could also play a role in the decline.
CURRENCY
Investors flocked to the dollar for safety as Credit Suisse's tipping at the edge caused a plunge in European currencies and bond yields, raising concerns about inflation and global banking issues. Despite the worries, the ECB does not give any indication that it will sway from its 50-basis point hike.
