Bank Contagion Spreads to Europe

Global stock are under severe pressure today, especially European banks, as Bank Storm Spreads to Europe. 

Credit Suisse Group AG shares fell more than 25% Wednesday and hit a fresh record low, reflecting increasing concerns that troubles that hit regional U.S. banks have migrated across the Atlantic.

Other major European banks took hits, with shares in France’s two major international banks, Société Générale SA and BNP Paribas SA, both down more than 10%. Shares in Germany’s Deutsche Bank AG slid 8%.

The drop in Credit Suisse bonds and shares indicates that “investors judge that this bank needs to be rescued,” said Joost Beaumont, head of bank research at Dutch lender ABN Amro.

“If regulators do not handle the Credit Suisse situation well, this will send shockwaves through the whole sector,” he said. “To make matter worse, both sides of the Atlantic have banking issues.”

Prices on Credit Suisse bail-in bonds, which get wiped out in case the bank runs into serious trouble, fell sharply. Bid prices on the 2027 bonds on Tradeweb slid to 55 cents on the dollar from 72 cents the day before. They traded close to 90 cents at the start of the month.

On Tuesday, the bank said it found material weaknesses in its financial reporting. 

The ECB did not comment nor did the Swiss National Bank.

It's amusing watching shares in a bit of a rally mode. As I type, it's only down 15 percent on the day after being down 35 percent or so.

If you bought today's low and cashed out you are up 22 percent. Congratulations. 

Credit Suisse Monthly Chart

The monthly chart is amusing. Since 2008, the bank has had rallies of 220%, 112%, 47%, 116%, and 134%. 

Today, Credit Suisse fell to a new record low, it's shares are now likely worthless. 

Nothing Tame About the CPI, Just Elation Over Interest Rate Hike Odds

Yesterday, I commented Nothing Tame About the CPI, Just Elation Over Interest Rate Hike Odds

Today reality set in as US equity holders were again punished.

I have many times commented of the need to be careful of what you wish and that when the Fed pauses you may not like it. 

Today, we have strong evidence with the S&P tumbling as the market starts to price out any rate hike in March.

This post originated at MishTalk.Com.