UBS buys Credit Suisse, First Republic stock, U.S. dollar: 3 things to know
Yahoo Finance Live’s Julie Hyman summarizes three key topics to watch for this morning.
BRAD SMITH: Let's get right to the three things that you need to know to start off your morning. First thing you need to know, a huge deal in the European banking space as UBS buys arch rival Credit Suisse for over $3 billion in a bid to shore up the global banking sector. The embattled bank's shares plummeted in the biggest one-day fall since 2008. The price per share now marks a 99% decline from their peak. Credit Suisse shareholders will get one UBS share for every 22.48 Credit shares that they hold on to.
But bondholders with the bank, they weren't so lucky. In a massive blow that startled investors, $17 billion in risky AT1 bonds are set to be completely wiped out in the takeover.
The second thing that you need to know, world markets reacting to the volatility. In Asia, stocks underwent a flurry of heavy selling on the Credit Suisse-UBS news, closing with losses. European markets also opened lower with banking shares taking the biggest hit. The likes of Deutsche Bank and BNP Paribas trading to the downside.
In the US, regional banks, they continue to be the focus with shares of First Republic slumping in premarket after being downgraded by S&P Global. That's the second time in less than a week.
And the third thing that you need to know, what does it all mean for the Fed? In the immediate aftermath of Credit Suisse's deal, central banks across the globe, they joined forces to make sure the US dollar remains available across world markets. This all ahead of the Federal Reserve's crucial rate decision on Wednesday where they will determine whether to hike interest rates again. Many economists predict a quarter-point rate hike is on the table, although others argue that recent bank turmoil should prompt a pause.