© Reuters.
Investing.com – It collapsed strongly in today’s trading, as banks fell and fears of the nightmare of the collapse of banking sectors around the world and the approach of a global economic crisis returned, in exchange for the strength of safe havens.
Texas crude fell by 7%, to record $66.30 a barrel, which is the largest decline in one day in six months, while it fell by 6.75%, to record $72.22, and fell below $75 for the first time since 2021.
The decline came as global risk markets sold off after news that Credit Suisse’s largest investor, the National Bank of Saudi Arabia, would not provide further assistance to the beleaguered bank. The news led to a drop of more than 20% in the bank’s US-listed shares. It also raised concerns about the state of the global banking system less than a week after the failure of two US regional banks.
Pressure in smaller banks has prompted Goldman Sachs (NYSE:) to cut its US GDP growth forecast.
“Small and medium-sized banks play an important role in the US economy,” wrote economists at Goldman. “Banks with assets less than $250 billion account for about 50% of commercial and industrial lending in the United States, 60% of residential mortgage lending, 80% of commercial real estate lending, and 45% of consumer lending.”
They added: “US policy makers have taken aggressive steps to shore up the financial system, but concerns about stress in some banks remain.” “Continued pressure may cause smaller banks to become more conservative about lending in order to conserve liquidity in case they need to meet depositor withdrawals, and tightening lending standards could affect aggregate demand.”
The Federal Reserve is scheduled to hold a policy meeting next week. Going into the week, traders have priced in a rate hike of at least 25 basis points. However, CME Group’s FedWatch tool now shows approximately 2 to 1 that prices will remain at current levels.
