(CercleFinance.com) – At the final gong, the Parisian index arrogates 1.27%, to 7013 points, benefiting from the net appeasement on banking stocks. Indeed, this morning the CAC40 plunged by nearly 2%, notably weighed down by the heavyweight of Société Générale and BNP Paribas which then yielded 7% and 5% respectively, against -0.8% and +1.7% at the close. .
It should be noted, however, that during the day, the FED, the Bank of England, the Bank of Canada, the European Central Bank (ECB), the Bank of Japan, the Swiss National Bank (SNB) announced concerted measures aimed at improve the supply of liquidity through permanent ‘swap’ agreements (loans against collateral provided by banks) in US dollars.
Christine Lagarde has just said that ‘financial tensions could temper demand and do some of the work that would otherwise have been done by tight monetary policy: without these tensions, we would have indicated that further rate hikes were necessary’ , a clever way to confirm that the rate hikes are probably over, since they are no longer necessary.
And as if everyone had agreed, the FED has just issued a declaration in the same vein: ‘the current turbulence could encourage a decline in inflation via a ‘shock’ of confidence. Consumers who are more timorous with banking stress, vacant jobs that find takers in the face of ‘perceived’ economic risk, would go in the direction of less pressure on wages’.
With regard to the primary source of the ‘stress’, UBS announced last night its intention to buy Credit Suisse for an amount of 3 billion Swiss francs (about three billion euros), a decision forced by the Swiss banking authorities ( FINMA) and the SNB.
Buyer UBS is offered a credit line of ChF 100 billion plus $9 billion in loss coverage (the ‘CS’ carries $14 trillion of derivatives outstanding, with a level of risk that could be low , medium, or high) post-merger, government takeover
Overall, and beyond Credit Suisse and the ‘regional banks’, the weight of bad debts and the impact of the rise in interest rates could penalize the most fragile banks, raising fears of new bankruptcies.
Given the mistrust that currently surrounds European banks, the meeting of the Federal Reserve’s monetary policy committee, which will be held tomorrow and Wednesday, is almost a non-event.
The markets nevertheless seem to be anticipating a change of course on the part of the Fed, which should be keen not to further destabilize a financial system already in turmoil.
According to the CME Group’s ‘FedWatch’ barometer, investors estimate that the probability of a status quo for the US central bank at the end of its FOMC this week is close to 48%.
The remaining 52% are counting on a limited rate hike of 0.25 percentage points.
“If the Fed were to make a 0.5% hike – which seemed entirely possible just a week ago – markets could be seriously shaken,” warns Steven Bell, chief economist at Columbia Threadneedle Investments for the European region.
The erratic movements of the CBOE’s VIX volatility index (-3% on Monday) – often dubbed the ‘barometer of fear’ on Wall Street – also point to wide variations in the markets.
While some strategists claim that the situation is not as bad as it was during the 2008 financial crisis, the markets should face very high volatility this week.
On the rate side, after a sharp drop in the early morning (risk-off), the scores are back in balance: the OAT shows -3Pts at 2.6640%, the US T-Bonds +8Pts at 3.487% against 3, 29% at the lowest… already 20Pts of intraday volatility.
The Euro is recovering after its fall of -1.3% this morning towards $1.0630: it only lost 0.5% at 1.0725… there too, an unusual volatility.
In the news of French companies, Aéroports de Paris (ADP) announces a framework agreement with GMR Airports Infrastructure Ltd (GIL), its partner in the airport holding company GMR Airports Ltd (GAL), initiating a process that should lead to a merger between GIL and GAL in the first half of 2024.
Orpea announced on Monday that it had finalized the terms of the additional financing obtained at the beginning of the month from its main banking partners.
Orange should put in place a collective conventional break plan covering around 700 positions in the Orange Business division according to Le Monde and Les Echos. This plan should be presented to union representatives.
Finally, GTT (Gaztransport and Technigaz) indicates that it occupies, for the fourth consecutive year, the first place in the INPI list of ETIs (intermediate-sized companies) filing patents, with 57 patents published in 2022.
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