Credit Suisse Warns Another Quarterly Loss Is Likely
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Credit Suisse Group AG said Wednesday that it is likely to post a loss for the second quarter, as it continues to face challenging market conditions while it presses on with a restructuring. The Swiss lender said it faced more volatile markets, weak customer flows and continued debt reduction by clients, especially in the Asia-Pacific and China region. The past two quarters have been unprofitable for the bank. The investment bank’s performance was depressed in April and May, and the unit will likely post a quarterly loss, Credit Suisse said. The division is being trimmed down amid a decision to reduce risk and shift focus on wealth management. Credit Suisse also said it plans to keep a common equity Tier 1 ratio - a measure of capital strength - of around 13.5% in the short term. It targets a CET 1 ratio of more than 14% for 2024. Legal costs to settle legacy scandals and a weakened financial performance as the bank executes a plan to dial down risk following the twin collapses of Greensill Capital and Archegos Capital Management - which resulted in a financial hit of several billions of dollars - have likely eaten away some of the bank’s capital.
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Inflation and interest rate concerns dampened the buying mood on the Swiss stock market on the first trading day after the long Whitsun weekend. However, the market held up quite well by European standards, with gains in the banking and insurance sectors contributing significantly. The SMI gained 5 points to 11,534. Among the 20 SMI stocks, there were 15 price gainers and five price losers. 30.35 million shares were traded (previously: 20.86 million). Meanwhile, high inflation is reducing consumers' purchasing power, as illustrated by weak British retail data and a profit warning from the US supermarket chain Target. This weighed on consumer-related stocks such as Swatch (-1.3%), which also suffered from a price target cut by UBS, and Dufry (-0.4%). The SMI heavyweight Nestle, which is actually considered defensive, fell by 0.9 per cent. Here, the fact that consumers are increasingly buying no-name products instead of expensive brand-name articles due to the rise in food prices is likely to have weighed. On the other hand, shares of banks and insurers were sought after as beneficiaries of the higher interest rates. Credit Suisse and UBS posted gains of 1.7 and 0.7 per cent, respectively. Swiss Life, Swiss Re and Zurich rose by up to 1.9 per cent.
European equity indices closed lower on Tuesday, hurt by high bond yields and fears of a weakening US consumer. The Stoxx Europe 600 index futures contract lost 0.3% to 442.9 points. In Paris, the CAC 40 and the SBF were down 0.7 percent each. In Frankfurt, the DAX 40 was down 0.7%, while in London, the FTSE 100 was down 0.1%. Deutsche Bank AG relocated hundreds of employees from its technology center in Russia to Berlin and decided to make the German capital a tech center for its investment and corporate banking activities. The German lender offered the roughly 1,500 staff who were in Russia the chance to move to Berlin with their families, and about half accepted, according to a person familiar with the move. The bank hasn’t decided what will happen to the Russian center and the staff who decided to stay. Their main task is to develop and maintain software for trading and corporate banking. Bayer AG’s $63 billion bet on Monsanto Co. is finally showing signs of paying off, as food shortages stoked by Russia’s invasion of Ukraine drive demand for seeds and pesticides to boost global crop production. Among Europe’s best-performing large stocks this year, the German agricultural-chemicals and pharmaceutical giant is up 41%. That is ahead of rivals including BASF SE, which is also based in Germany, and New York-listed Corteva Inc.
U.S. stock indexes climbed in a volatile session Tuesday as investors continued to assess the outlook for inflation and economic growth. The S&P 500 rose 39.25 points, or 1%, to 4160.68, driven by gains in 10 of the index's 11 sectors. The Nasdaq Composite climbed 113.86 points, or 0.9%, to 12175.23. The Dow Jones Industrial Average increased 264.36 points, or 0.8%, to 33180.14. All three indexes had opened modestly lower after a profit warning from Target cast a pall over the retail sector. Stocks have swung in recent days, buffeted by shifts in views about the strength of the economy and the likely path for central banks and interest rates. A big concern is that central banks could act too aggressively as they combat inflation and trigger a slowdown in economic growth, or even a recession. Target shares dropped $3.69, or 2.3%, to $155.98 after the retailer issued a warning that its profit would decline because it needs to cancel orders or offer discounts to clear out unwanted goods, a potential sign of lower consumer spending. Shares of other big retailers followed, with Walmart declining $1.50, or 1.2%, to $123.37. A significant increase in retail inventories and diminishing demand could cause prices to moderate across most consumer goods in the second half of the year, according to Peter Essele, head of portfolio management at Commonwealth Financial Network.
Supported by positive U.S. data, most of the East Asian stock exchanges are moving upwards in the middle of the week. Technology stocks in particular show gains, after they had recently been under pressure due to ongoing interest rate concerns. The Hang Seng Index in Hong Kong (+1.7%) led the list of winners. Participants here point to the good performance of Chinese tech stocks on Wall Street. Shares of game developers are sought after China allowed 60 online games to be published again on Tuesday after a long time.
The yield on the U.S. benchmark 10-year Treasury note eased to 2.969% from 3.037% on Monday. Yields fall when prices rise.
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