Wall St strengthens after big bank deal

NEW YORK, March 20, (AP): Wall Street is rising Monday after regulators pushed together two huge banks over the weekend and made other moves to build confidence in the struggling industry.

The S&P 500 was 0.8% higher in midday trading, with stocks in the financial industry helping to lead widespread gains. The Dow Jones Industrial Average was up 347 points, or 1.1%, at 32,209, as of 11:45 a.m. Eastern time, while the Nasdaq composite was 0.3% higher.

Much attention has been on banks because they may be cracking under the pressure of the fastest flurry of hikes to interest rates in decades. Swiss banking giant UBS said Sunday it would buy its rival Credit Suisse for almost $3.25 billion in a deal quickly put together by regulators. Credit Suisse has been battling a unique set of troubles for years, but they came to a head last week as its stock price tumbled to a record low.

UBS stock rose 2.5% in Switzerland, while Credit Suisse fell 55.5%.

A group of central banks stretching from the United States to Japan also announced coordinated moves on Sunday meant to ease strains in the financial system. The moves would allow banks more access to U.S. dollars if they need them, in an echo to a practice widely used in prior crises.

In the U.S., most of the attention has been on smaller and mid-sized banks on fears that falling trust could push their depositors to pull their money all at once. That’s what’s called a bank run, and such a move could topple them.

First Republic Bank has been at the center of investors’ crosshairs in the hunt for the industry’s next victim following the second- and third-largest U.S. bank failures in history. Its shares fell 17.5% after S&P Global Ratings cut its credit rating for First Republic for a second time since Wednesday.

Europe

Global stock markets sank Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

Hong Kong’s main index slid 2.7%. London, Frankfurt and Paris opened down more than 1%. Shanghai, Tokyo

and Sydney also declined. Wall Street futures were off 1%. Oil prices plunged more than $2 per barrel.

Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders, including a facility to borrow U.S. dollars if necessary.

Switzerland’s share benchmark was down 1.8%, while Credit Suisse’s shares plunged 63% and rival UBS, which is acquiring it, sank 14%.

Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. Prices of bonds and other assets on their books fell, fueling unease about the industry’s financial health.

“Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” said Stephen Innes of SPI Asset Management in a report.

Asia

The Shanghai Composite Index lost 0.5% to 3,234.91 after the Chinese central bank on Friday freed up more money for lending by reducing the amount of their deposits commercial lenders are required to hold in reserve.

The Kospi in Seoul retreated 0.7% to 2,379.20 and Sydney’s S&P-ASX 200 lost 1.4% to 6,898.50.

India’s Sensex lost 1.3% to 57,241.45. New Zealand and Southeast Asian markets also declined.

The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

Oil

In energy markets, benchmark U.S. crude plunged $2.45 to $64.29 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74. Brent crude, the price basis for international oil, lost $2.67 to $70.30 per barrel in London. It retreated $1.73 the previous session to $72.97.

Currencies

The dollar declined to 130.70 yen from Friday’s 131.67 yen. The euro retreated to $1.0647 from $1.0681.