Goldman issues recession warning as shares of the big four US banks fall

Goldman Sachs says chances of a recession have increased after three US banks collapsed, struggling Credit Suisse got a lifeline and ‘Big Four’ stocks plummeted.

The investment bank’s chief economist Jan Hatzius warned on Thursday that there was a 35 percent chance of a recession hitting the US in the next 12 months.

That’s a dramatic increase from the 25 percent chance Hatzius made in his previous prediction.

Hatzius is the only Wall Street economist to date to raise the likelihood of a recession, but Goldman Sachs is known for having its finger on the pulse of economic trends.

He also lowered the United States’ economic outlook, forecasting that GDP will fall 0.3 percent to 1.2 percent in the coming quarter.

Credit Suisse appears to have stabilized on Thursday morning after a $54 billion Swiss government bailout – but Goldman Sachs has warned the US now faces a 35 per cent risk of recession next year

The crisis hit America’s so-called “Big Four” banks. JP Morgan shares fell 4.72 percent to $128.26 a share and Bank of America shares fell 0.94 percent to $28.49.

Wells Fargo is down 3.29 percent at $38.85 a share, while Citigroup’s stock is down 5.44 percent and is currently trading at $44.82 a share.

Shares in troubled bank Credit Suisse are up 35 percent after the Swiss central bank offered the company a $54 billion loan.

Shares of the bank rose 5.56 percent to $2.28 in premarket trading after news of the lifeline broke.

That’s still well below the $2.49 per share recorded Tuesday, just before the bank was engulfed in the crisis that brought down Silicon Valley Bank in the United States.

But Thursday’s gains are sizeable compared to Wednesday’s $1.76 per share, which sparked fears the 117-year-old bank was on the brink of destruction.

The crisis comes after the collapse of Silicon Valley Bank last Friday, followed by Silvergate Corporation and Signature Bank.

The Silicon Valley bank collapse was the second largest in US history, right after the Washington Mutual bank collapse in 2008.

Source: | This article originally belongs to Dailymail.co.uk