CNBC Daily Open: UBS gets a new (old) CEO

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Banks are facing major changes.

• US stocks fell on Tuesday as Treasury yields rose and the Senate hearing hit banks. Asia Pacific markets were mostly higher on Wednesday. Hong Kong’s Hang Seng index rose 2.03% – Chinese tech companies like Tencent, Meituan and Baidu rose along with Alibaba after news of the split.

• PROFESSIONAL Generative artificial intelligence will boost global economic growth by $7 trillion and boost productivity by 1.5% over the next decade, Goldman Sachs said. The bank highlighted stocks that could benefit.

If you squint a little, Tuesday looks like a “normal” trading day – almost. That means the US markets were concerned yesterday with fears of inflation and interest rates, not with a banking crisis.

Of course, the main news of the day was still about banks. UBS earlier today reappointed Ermotti as Group CEO, citing Ermotti’s successful repositioning of the bank following the financial crisis of 2008, which allowed UBS to “regain the trust of clients and other stakeholders”. This suggests that UBS is prioritizing stability in its merger with Credit Suisse.

Across the Atlantic, the Senate on Tuesday grilled US regulators over the collapse of SVB. Banks slipped after regulators said they favor tougher rules for banks. But the movement — the SPDR S&P Regional Banking ETF falling 0.09% — was marginal compared to the sharp swings of the past two weeks.

While we don’t yet know the impact of UBS’s CEO swap, US interest rates arguably had a bigger impact on market moves than the Senate hearing. US Treasury yields rose again – the 2-year yield hit 4.08%, breaking above the 4% mark for the first time in almost a week, and the 10-year yield rose to 3.571%. The rise in yields suggests that traders are becoming increasingly confident that the banking turmoil is abating and are turning their attention back to inflation.

Indeed, the Conference Board’s Expectations Index showed that consumers believe inflation will remain at 6.3% over the next 12 months and that their near-term prospects are at levels consistent with an impending recession. (Although it must be admitted that the consumer outlook has improved slightly since February, even after the collapse of the SVB.)

As a result, the rate-sensitive Nasdaq Composite fell on the second day, losing 0.45%. It might seem like a small drop, but Solus Alternative Asset Management’s Dan Greenhaus warned “only the top quintile [of the Nasdaq] is above; all four other quintiles are down,” suggesting the index is “a bit weaker than the headline suggests.” Other major indices did not fare better. The S&P 500 fell 0.16% and the Dow Jones Industrial Average slipped 0.12%.

“For now, investors seem to be looking beyond the challenges in the financial sector and realizing that US economic growth remains resilient,” said Brian Levitt, global markets strategist at Invesco. Bizarrely, while that’s bad news for inflation, it’s probably good news for anyone who’s been consumed by banking fears over the past few days.

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