Credit Suisse, UBS – How to trade these stocks ahead of the Fed
While Credit Suisse and UBS shares look set for a rocky ride on Wall Street, European bank stocks are coming off lows. IG’s Angeline Ong says the near-term direction of trade will be driven by the Fed.
Rocky ride
Credit Suisse and UBS shares look set for pain.. Ahead of the Wall Street open, Credit Suisse Group AG - ADR listed shares look set to tumble some 57%. This after falling almost 7% in the previous session. UBS AG's US listed shares look set to tumble more than 3% at the opening bell on Monday after losing more than 5% in the previous sesion.
Stabilising
We're seeing a ripple effect, not just in equities but in bonds, commodities like oil and gold, as well. This, as UBS swallowing its rival Credit Suisse, failed to sooth investor concerns over the health of the banking sector. Market volatility gauges are moving higher, but it must be said that it feels like the market is stabilising. The VIX is coming off earlier highers. European banks, which saw big losses earlier, are now coming off lows too. Some traders citing short covering and buying on the dip.
Fed
So, what's going to propel this trade? Well, in the near-term, it's the Fed. Amid the now mixed rate hike bets, investors are waiting to see if and how the Fed will re-calibrate their thinking surrounding inflation, because if the now-banking crisis slows loan and credit growth, it will lead to deflationary results.
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