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Investing.com – It gave up more than 400 pips today, trading in the red during the last hour of Thursday’s session.
The index closed yesterday’s trading session down by more than 530 points. Banking concerns remain dominating the scene, after European stocks were hit by a red storm due to banking concerns today as well.
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A report from ratings agency Moody’s warned that US banking turmoil may be “uncontainable”.
Despite swift action by regulators and policymakers, there is a growing risk that banking system stresses will spill over into other sectors and the US economy, “leading to greater financial and economic damage than we anticipated,” according to Moody’s Investors Service, one of the world’s largest financial markets. 3 credit rating institutions.
Simply put, the risk is that officials “will not be able to curtail the current turmoil without long-term and potentially severe repercussions inside and outside the banking sector,” wrote Atsi Sheth, managing director of credit strategy at Moody’s. However, the agency’s core view is that US officials will “broadly succeed.”
Of the three ways banking system problems could spread more widely, the “potentially most powerful,” according to Moody’s, are: risk aversion by investors and traders and banks’ decision to back off from extending credit. The ratings agency said such a scenario could lead to “risks crystallizing into multiple pockets simultaneously”.
“Over the course of 2023, as financial conditions continue to tighten and growth slows, a range of sectors and entities currently facing credit challenges will face risks to their credit profiles,” the Moody’s team wrote. Banks are not the only type of players vulnerable to interest rate shocks, and “market scrutiny will focus on those entities subject to similar risks as distressed banks”.
