ASX to plunge as panic sets in
Australia’s stock exchange will plunge by an eye-watering two per cent off the back of the news that major European bank Credit Suisse is on the brink.
On Thursday morning, CommSec, an arm of the Commonwealth Bank, warned that the Australian Securities Exchange (ASX) is expected to “drop sharply”.
The top 200 companies are expected to open at 133 points or 1.9 per cent lower this morning.
The European stock market and Wall Street are also down as investors panic with three American banks collapsing in the past week.
Now a fourth bank, major financial institution Credit Suisse, also appears on thin ice.
Shares in major investment bank Credit Suisse plunged by 24 per cent overnight as the financial institution teetered on the brink.
Trading in Credit Suisse, the world’s seventh largest investment bank, was suspended several times as the stock plummeted, sparking a worrying ripple effect as shares in other European banks also plunged.
Stocks in the Swiss bank fell to 1.68 Swiss francs – the lowest price in its history.
Credit default swaps for Credit Suisse — the cost of insurance against default — are nearing distressed levels.
Ray Atrill, the head of foreign exchange strategy and markets at NAB, said that anxiety about the banking sector was having a major impact.
“Financial instability centred on the banking system is back firmly to the fore overnight, Credit Suisse currently at the centre of the storm, its stock ending the European day some 24 per cent down,” he warned.
The USA’s Wall Street stock exchange and their S&P 500 index took a 0.7 per from the news, closing that much lower than the day before.
Meanwhile, the Dow Jones index fell 0.9 per cent.
It comes as the CEO of major investment firm Blackrock said the collapse of Silicon Valley Bank (SVB) could be the beginning of a “slow moving crisis”.
Credit Suisse Chairman Axel Lehmann told finance website Bloomberg on Wednesday that the bank would not need “state assistance” to stay afloat as it had “already taken the medicine”, referring to changes made after it reported an $8 billion loss for 2022.
The US Treasury Department said it was monitoring the situation at Credit Suisse.
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