The ASX had a quiet session on Friday to end the week. In fact, it endured a sixth straight week of falls and its worst run since May 2008.
Fifteen years ago, the market fell for nine consecutive weeks. However, in 2023 there is optimism for a recovery with IG analyst Tony Sycamore suggesting, “We remain optimistic that the ASX200 can reclaim the 200-day moving average at 7,010 (as it did in early January) and allow us to stay with the view that the pullback from the February 7,567 high is countertrend.
"However, should the ASX 200 fail to reclaim 7,010 and then see a sustained break below the 6,905 low of early January, a retest of the bottom of its 12-month range at 6,410 is possible.”
The fallout from the US banking crisis will continue to weigh on the ASX this week and we’ll likely see another red day.
ASX 200 futures closed 1.4% lower to 6,921 before UBS finalised its deal to rescue Credit Suisse overnight.
All eyes will be on the US Federal Reserve’s monetary policy meeting this week in light of the banking situation.
The UBS takeover of Credit Suisse will speed up elements of its organic growth strategy including its plans for the Asia Pacific region.
However, UBS chief executive Ralph Hamers is under no illusion the task will be easy, citing the challenges around running down Credit Suisse’s investment banking arm.
"We will have an even bigger platform for investment … we're making a giant step in terms of our strategy to grow," Hamers told analysts.
The takeover is expected to strengthen UBS's geographic footprint, including in Switzerland, Europe, the Asia Pacific region and Latin America.
"In Asia Pacific specifically, with our strength in Hong Kong, Singapore and China that will now be complemented by Credit Suisse's leading position in South East Asia, which part of our strategy was focused on.”
"Basically we can accelerate our organic strategy here with an inorganic opportunity," Hamers said.
UBS will acquire Credit Suisse Group for more than $US3 billion ($A4 billion), in a government and regulator-brokered deal.
UBS chairman Colm Kelleher says the move to buyout Credit Suisse was to preserve global financial stability.
“UBS had been firmly committed to our organic growth strategy. Various events over the last few weeks resulted in regulators across the world, urging UBS to consider a takeover at Credit Suisse to preserve global financial stability,” he said at a conference in Zurich.
“I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders, protects UBS from additional downside and should support earnings growth over time.”
For any Australians worried about our own banking system, it remains as resilient as ever.
“Conditions in global bond markets have been strained recently following the failure of Silicon Valley Bank in the US,” Reserve Bank of Australia assistant governor Chris Kent said.
Kent, who has responsibility for financial system stability, told KangaNews in Sydney on Monday morning, “Volatility in Australian financial markets has picked up but markets are still functioning and, most importantly, Australian banks are unquestionably strong – the banks’ capital and liquidity positions are well above APRA’s regulatory requirements.
“Banks are already well advanced on their bond issuance plans for the year and could defer their bond issuance for a while. Even if markets remain strained for a time, Australian banks’ issuance will continue to benefit from the strength of their balance sheets.”
The week past
Here’s what we saw (source Commsec):
- Europe closed weaker, with the Banks and the Insurance indexes falling by 2.6%, and Financial Services by 2.1%.
- Shares in Credit Suisse fell by 8% ahead of the takeover announcement.
- Shares in BT Group fell 6.1% after the British telecom regulator delayed the telecom firm's fibre pricing decision. The continent-wide FTSEurofirst 300 index fell by 1.2% and the UK FTSE 100 index lost 1.0%.
- US sharemarkets also fell on Friday. Shares in First Republic Bank slumped 32.8% after the bank announced it was suspending its dividend.
- SVB Financial Group filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection.
- The KBW Regional banks index lost 5.4%, the S&P 500 Banks was down 4.6% and Energy fell 1.5%.
- Shares in FedEx (NYSE:FDX) Corp lifted 8% after raising its full-year forecasts.
- The Dow Jones index fell by 385 points or 1.2%. The S&P 500 index lost 1.1% and the Nasdaq index fell 87 points or 0.7%.
- On the week the Dow lost 0.1% but the S&P 500 rose 1.4% and the Nasdaq rose 4.4%.
Currencies
- The Euro held between US$1.0613 and US$1.0682 lifted to US$1.0705 at Asia open.
- The Aussie dollar fell from US67.23 cents to US66.73 cents but was near US67.35 cents at Asia open.
- The Japanese yen lifted from 133.35 yen per US dollar to JPY131.60 and was near JPY132.47 at the Asia open.
Commodities
- Global oil prices fell by nearly 2.3% on Friday, reversing early gains. Investors fretted that financial instability may slow global economies and thus oil demand.
- The Brent crude oil price fell by US$1.73 or 2.3% to US$72.97 a barrel.
- The US Nymex crude oil price eased by US$1.61 or 2.4% to US$66.74 a barrel. Over the week Brent fell by 11.9% and Nymex fell by 13%.
- Base metal prices were mixed on Friday. The copper futures price rose by 0.7% but the aluminium futures price fell by 0.2%. Spot prices rose 0.6%-2.1%.
- Over the week metals were mixed with copper down 2.9% and nickel up 3.1%.