Asian stocks tumble after Credit Suisse takeover

Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

“Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

The Hang Seng
HSI,
-2.96%
in Hong Kong lost 3% to 18,920 and the Nikkei 225
NIK,
-1.42%
in Tokyo shed 1.2% to 26,990.25.

The Shanghai Composite Index
SHCOMP,
-0.48%
lost 0.2% to 3,241 after the Chinese central bank on Friday freed up additional money for lending by reducing the amount of money commercial are required to hold in reserve. Hong Kong shares of HSBC
5,
-6.32%
dropped over 6%.

The Kospi
180721,
-0.69%
in Seoul retreated 0.6% to 2,382.03 and Sydney’s S&P-ASX 200
XJO,
-1.38%
lost 1.4% to 6,900.00.

India’s Sensex opened down 1.1% at 57,341.79. New Zealand and Southeast Asian markets also declined.

The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

Separately, New York Community Bank
NYCB,
-4.66%
agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

Concerns persist about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index
SPX,
-1.10%
lost 1.1% on Friday to 3,916.64.

Shares of First Republic Bank
FRC,
-32.80%
sank nearly 33% to bring their plunge for the week to 71.8%.

The Dow Jones Industrial Average
DJIA,
-1.19%
lost 1.2% to 31,861.98. The Nasdaq Composite
COMP,
-0.74%
fell 0.7% to 11,630.51. Dow futures
YM00,
-1.10%
fell 0.3% early Monday, while S&P 500 futures
ES00,
-0.92%
and Nasdaq-100 futures
NQ00,
-0.60%
were steady.

The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

In energy markets, benchmark U.S. crude
CL.1,
-2.83%
sank 93 cents to $64.81 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74. Brent crude
BRN00,
-2.67%,
the price basis for international oils, declined $1.05 cents to $71.92 per barrel in London. It retreated $1.73 the previous session to $72.97.

The dollar
DXY,
+0.05%
gained to 131.83 yen from Friday’s 131.67 yen. The euro
EURUSD,
-0.09%
declined to $1.0676 from $1.0681.

MarketWatch contributed to this report.