A fresh wave of panic rocked markets on Thursday as turmoil at Credit Suisse added to fears of instability in the global financial system, sending bank stocks tumbling, and bolstering speculation that central banks will need to soften their policy tightening to prevent a severe recession.
Shares in Credit Suisse sank 24 per cent to a record low after its largest shareholder, the Saudi National Bank, said it wouldn’t pump more capital into the Swiss bank if there was a call for additional funding. That comes just days after the second- and third-largest bank failures in US history.Renewed fears of contagion spilled over to the Australian sharemarket on Thursday, with the SP/ASX 200 diving 1.9 per cent at the open to 6935.
The financials sector fell 2.2 per cent, with the mid-size lenders hit the hardest; Macquarie dropped 3.1 per cent to $172.60 and BendigoRio Tinto tumbled 4 per cent to $114.79 and BHP fell 3.9 per cent to $43.80.
The US regional banks were hit by a fresh wave of selling amid fears that customers will try and withdraw their money from the lenders. First Republic plunged 21.4 per cent after it was cut to junk by SThe major US banks weren’t immune either, with Morgan Stanley and Citigroup each falling more than 5 per cent, while the KBW Bank Index dropped another 3.6 per cent.
“Financial stability concerns are dominating everything at present and regulators and central banks will need to ensure that order is restored soon,” ANZ economists said on Thursday morning.
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