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© Reuters. FILE PHOTO: A screen displays The Dow Jones Industrial Average (DJI) on the trading floor at the New York Stock Exchange (NYSE) after the markets closed in New York City, U.S., March 17, 2023. REUTERS/Andrew Kelly
By Amruta Khandekar and Ankika Biswas
(Reuters) – Wall Street’s main indexes were set for a subdued open in volatile trading on Monday as investors weighed a state-backed takeover of Credit Suisse and the odds of the Federal Reserve keeping interest rates unchanged this week.
Traders have raised bets of the Fed likely hitting a pause on rate hikes on Wednesday to ensure financial stability as bank sector troubles triggered by the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:) threaten to snowball.
Over the weekend, UBS agreed to buy rival Credit Suisse for $3.23 billion, in a shotgun merger engineered by Swiss authorities to avoid more market-shaking turmoil in global banking.
U.S.-listed shares of Credit Suisse plummeted 57.9% in premarket and were set to open at a fresh record low, while those of UBS lost 3.5%, as focus shifted to the hit to some Credit Suisse bondholders from the acquisition.
“Market’s been digesting the shotgun wedding between UBS and Credit Suisse. Systemic risks are a little bit more minimized (and) everyone is just looking forward to what the Fed’s going to do,” said Matt Orton, chief market strategist at Raymond James Investment Management.
“The Fed really is between a rock and a hard place because it’s got to stay committed to monetary policy. It’s worked hard to regain its credibility and this banking issue really throws a wrench into it.”
Traders’ bets are now tilted towards a no-hike scenario, with 43% expecting the Fed to raise rates by 25 basis points.
Investors also await economic data including existing home sales, weekly jobless claims and durable goods this week to gauge the strength of the U.S. economy.
U.S. stock futures reversed course to rise marginally in choppy trading. At 8:24 a.m. ET, were up 9 points, or 0.03%, were up 0.75 points, or 0.02%, and were up 1.75 points, or 0.01%.
Top central banks also moved on Sunday to bolster the flow of cash around the world, with the Fed offering daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the eurozone would have the dollars needed to operate.
Big U.S. banks such as JPMorgan Chase & Co (NYSE:), Citigroup (NYSE:) and Morgan Stanley (NYSE:) seesawed between losses and gains.
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