Early Morning Call: bank shares suffer as relief over Credit Suisse deal fades

Relief emerging from UBS’ acquisition of Credit Suisse has crumbled as investor attention turns to global bond market risks. Meanwhile, the case for a Fed interest rate pause has gained steam while Bitcoin nears a 9-month high. Credit Suisse deal We've got so much to get you through. Let's take you through the headlines. First, relief over the Credit Suisse deal crumbles. Attention turns to the bond market and the risks there. A case for a Federal Reserve (Fed) interest rate pause gained steam as global central banks bolster cash flow around the world. And Bitcoin nears a nine-month high - turmoil in traditional banking sparks a digital asset rally. Indices outlook Now on that note, let's quickly check on the Volatility Index. This is the volatility index. Of course, a fear gauge. It's looking like it's creeping higher there. As you can see as we head into the European market open just 30 minutes to go now until that open. And this is how the pre-market is looking, showing you the France 40 there looking slightly lower. That's the premarket view. Anyway, the German DAX or Germany 40 same picture they're slightly lower. Open indicated it's still 30 minutes to go till the open might I add? And the FTSE 100 a similar picture there as well. Futures indicating all these slightly lower opens after European shares recorded their worst five-week in five months on those banking crisis jitters. Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said that central banks have essentially done the right thing in putting an effective backstop in place. It's just going to take some time, Kleintop said. APAC overview Overnight in Asia, it's also a very interesting picture for you. Let's take a look at the chart and it's up all down arrows as you can see, the Nikkei down 1.4, Hang Seng settling down around 3.2 and the ASX down around 1.3. US overview Let's take a look at the Wall Street close as well because it was a very, very volatile week. The arrows also all pointing down, the S&P 500 down more than 1% along with the Dow Jones industrials. They all ended on a sour notice as fears about a contagion snowballed dramatically after the closure of three US banks last week, and of course, those liquidity concerns about Credit Suisse in Europe. Speaking of Credit Suisse, let's take a look at that now because Credit Suisse has been hogging the headlines all weekend. Just to catch you up on some of the key details, UBS has agreed to by Credit Suisse in a historic government-brokered deal. The Swiss Bank is paying three billion francs. That's $3.3 billion for its rival in an all-share deal. Now, this includes extensive government guarantees and liquidity provision as well. What's staggering is that the price per share is a 99% decline from Credit Suisse's peak in 2007. Well, what is in it for UBS, well it gets Credit Suisse's crown jewel, it's profitable domestic bank in Switzerland. The question now is what happens to Credit Suisse' risky bonds and those that are holding it. Will it create another wave of turmoil, this time for bond markets? Well, that remains to be seen.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Publication date:
2023-03-20 17:13:34 (GMT)

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