Credit Suisse and Nomura stocks tumble following an investment firm’s defaults.
The fallout from a series of defaults at a New York hedge fund reverberated through markets for a second day on Monday, as global banks tried to size up their exposure to one firm’s string of bad bets.
Shares in Credit Suisse, the Swiss bank, dropped 14 percent on Monday and the Japanese bank Nomura closed 16 percent lower, after the banks said they could face significant losses because of defaults by an American investment firm.
U.S. stock futures fell on Monday, with the S&P 500 set to open 0.7 percent weaker. European stock indexes were mixed but an index of European banks was 1.6 percent lower.
Neither Credit Suisse nor Nomura named the investment firm whose default could lead to big losses, but Bloomberg identified it as Archegos Capital Management, a New York-based family office that manages the wealth of Bill Hwang, a former hedge fund manager at Tiger Asia Management who was found guilty of wire fraud in 2012.
Investment banks that provided services to Archegos, such as Goldman Sachs and Morgan Stanley, dumped huge quantities of stocks including ViacomCBS and Chinese tech companies on Friday.
Archegos was forced into the stock sales, worth about $20 billion, after bets the fund made moved the wrong way, Bloomberg reported. Shares in ViacomCBS, one of Archegos’s positions, dropped 23 percent on Wednesday last week. On Friday, the share price plummeted a further 27 percent as the investment banks liquidated positions.
Shares in Goldman Sachs and Morgan Stanley were about 3 percent lower in premarket trading. Shares in Deutsche Bank fell more than 4 percent on Monday, after it was said to also have some exposure to Archegos.
Credit Suisse has already been roiled this month by the collapse of Greensill Capital, a London-based financial firm it sold funds for, and to whom it extended loans of $140 million. The Swiss bank told investors it would probably report some losses on the loan.
“A significant U.S.-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks,” the Swiss bank said on Monday. It did not yet know the exact size of the loss from exiting its positions but “it could be highly significant and material to our first quarter results,” the statement said. https://www.nytimes.com/live/2021/03/29/business/stock-market-today