The president of Credit Suisse Axel Lehmann (G) and that of UBS during a press conference in Bern, March 19, 2023 (AFP / Fabrice COFFRINI)
The weekend’s emergency measures to ease fears over Credit Suisse and the strain on the banking system allowed the stock markets to rebound a little on Monday, after heavy losses last week, but the pressure persists on some banks.
After an opening in the red, the European indices recovered around 1:45 p.m. GMT in Paris (+0.94%), London (+0.40%) Milan (+0.94%), Frankfurt (+0.68%) .
Wall Street opened mixed, with the Dow Jones up 0.61% and the S&P up 0.15%, but the Nasdaq down 0.48%.
Down sharply at the start of the session, the financial sector is now up 0.77% on the Stoxx600 banking index. Some European banks have not yet made up all their initial losses for the session, such as Société Générale (-0.94%) and ING (-2.32%), but others are progressing such as Unicredit (+ 1.17% ) or BNP Paribas (+0.38%).
On the other hand in the United States, the First Republic bank, the most rowdy last week, plunged another 13% in the first exchanges of the session on Wall Street. On the other hand, the actions of the major American banking establishments progressed, like those of other regional banks concentrating the fears of investors, for example Western Alliance (+6.74%).
Credit Suisse’s stock is trading a bit higher than its UBS takeover price, though that’s still a drop of more than 56% from its Friday closing price. UBS rose 2.83%, after falling more than 10% in early trading.
“Investors are still struggling to assess the situation of financial stocks” and remain suspended from the meeting of the American central bank on Tuesday and Wednesday, comments Pierre Veyret, analyst at ActivTrades.
“Confidence always plays a major role in banking crises (…) This time, the public authorities clearly intend to act quickly and strongly”, explains Gilles Moëc, chief economist of Axa IM.
– “What do they know?” –
After intense negotiations this weekend, the first Swiss banking group UBS agreed on Sunday to buy for a pittance its rival Credit Suisse, with important guarantees from the Swiss government and liquidity from the SNB. , the Swiss central bank.
The Credit Suisse logo on the facade of a building in Bern, March 19, 2023 (AFP / Fabrice COFFRINI)
To calm banking stress, official statements were released on Monday morning by European, German, British and Italian financial authorities… “The European banking sector is resilient, with solid levels of capital and liquidity”, underlines the Central Bank (ECB) in a joint statement issued with the European Banking Resolution Mechanism (SRB) and the European Banking Authority (EBA).
On Sunday, the American (Fed), European, Swiss, British, Canadian and Japanese central banks said they were taking coordinated action to improve access to liquidity. An exceptional measure to restore confidence in the financial system, shaken for ten days by the bankruptcy of the American establishment Silicon Valley Bank (SVB).
But “the more policymakers act, the more bad news investors expect, which creates a horribly negative feedback loop, as if investors are asking themselves: + what do they know that we don’t know? +”, says Stephen Innes of SPI Asset Management.
– Signals to relax –
Propelled by growing worries about the banking sector, the price of gold rose above the symbolic threshold of 2,000 dollars an ounce on Monday, but has since fallen again. Around 1:30 p.m. GMT, the yellow metal crumbled by 0.45% to 1,980 dollars.
On the bond market, the rates of borrowings from European countries and the United States stabilized, a sign of relaxation for investors after their sharp drop at the start of the session.
The euro gained 0.49% against the dollar, at 1.0722 for the dollar, around 1:30 p.m. GMT.
On the oil market, the barrel of American WTI stabilized at 66.65 dollars (-0.13%), around 1:25 p.m. GMT, and the barrel of Brent from the North Sea at 72.99 dollars (+0.03 %).
European natural gas was trading at 40.80 euros per megawatt hour, after slipping below the 40 euro threshold for the first time since July 2021.