News over the weekend indicates the markets may be in for a wild ride today.
We reported over the weekend that two large US financial institutions reported sales of nearly $20 billion in Chinese Tech and US media companies on Friday:
Now this morning, two massive overseas banks announced their pending record losses:
Credit Suisse and Nomura warned Monday of “significant” hits to first-quarter results, after they began exiting positions with a large U.S. hedge fund that defaulted on margin calls last week.
While neither Credit Suisse nor Nomura named the fund, it’s been widely reported that Archegos Capital Management is the firm connected to the fire sale.
In a trading update before the market open, Credit Suisse said a number of other banks were also affected and had begun exiting their positions with the unnamed firm. The Zurich-based lender’s shares were down over 13% by lunchtime following the announcement.
The Japanese firm Nomura is facing a mess today:
Nomura also issued a trading update on Monday warning of a “significant loss” at one of its U.S. subsidiaries resulting from transactions with a client stateside. Japan’s largest investment bank said it was evaluating the potential extent of the loss, estimated at $2 billion. Its shares fell more than 16% on Monday.
“This estimate is subject to change depending on unwinding of the transactions and fluctuations in market prices,” the bank said.
Zero Hedge reports it this way:
Just around the time Nomura closed down 16.3%, its biggest drop on record after warning it faces around $2 billion in prime brokerage losses (see below) tied to a single US client – the now infamous Archegos tiger cub hedge fund – Swiss banking giant, Credit Suisse, was also swept up in the Archegos vortex after the Swiss bank said it faces a potentially “highly significant” loss from a U.S. hedge fund client defaulting on margin calls, sending the Swiss bank’s share plunging as much as 16%, the most since March last year and wiping out all 2021 gains.
