In spite of the struggling Swiss institution receiving a $54 billion lifeline this past week, shares of Credit Suisse continued to slide on Friday, giving up early gains. In fact, this is a warning that investor sentiment is still weak.
On Thursday, the relief brought on by the emergency liquidity line the bank obtained from the Swiss central bank earlier in the day was partially offset by a ratings drop and a U.S. lawsuit.
Moreover, after two days of wild swings that saw its shares soar 20% on Thursday after a 24% plunge on Wednesday when its largest investor stated it would not be able to expand its holding, Credit Suisse’s shares sank as much as 10%. Volatility continued to be high.
Frédérique Carrier, head of investment strategy at RBC Wealth Management said that a crucial concern was if depositors were sufficiently comforted to stop withdrawals over the following days.
Carrier added that markets felt relief that the Swiss central bank had intervened, but sentiment was bound to stay quite shaky, especially since investors would undoubtedly worry about the eventual economic effect of aggressive monetary policy tightening by the European Central Bank (ECB).
Furthermore, after March 13, Credit Suisse’s U.S. and European managed funds experienced a net outflow of more than $200 million, according to Morningstar Direct on Friday.
The ECB Supervisory Board held an unscheduled meeting on Friday to assess stress and vulnerabilities in the euro zone bank sector, which is another indication that worry over banking stress is still high.
The supervisors at the ECB did not notice any spread of the market volatility to the banks in the euro zone, according to a person familiar with the discussion at the meeting. Also, they discovered that exposure to Credit Suisse was unimportant and that deposits remained steady everywhere.
This week, shares of Credit Suisse have lost roughly 26% of their value, and they are on track to have their worst week since October 2008 and the global financial crisis.
