(Updated with futures, China close, European bond market open)
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Markets remain nervous, stocks expected in the red
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UBS to buy struggling competitor Credit Suisse
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Ten-year Bund yield falls below 2%
by Laetitia Volga
PARIS, March 20 (Reuters) – European stock markets are expected to open lower on Monday as the announcement of an emergency takeover of Credit Suisse by arch-rival UBS and coordinated action by central banks on access to liquidity were not enough to appease investors. investor fears about instability in the global banking system.
Futures contracts give a loss of 1% for the Parisian CAC 40
.FCHI , 1.03% for the Dax in Frankfurt .GDAXI , 1.39% for the FTSE in London .FTSE and 1.15% for the EuroStoxx 50.
Investors should therefore opt for caution despite the announcement on Sunday by UBS of the acquisition of its competitor Credit Suisse for three billion francs (3.04 billion euros), accompanied by a significant government guarantee.
This rescue operation orchestrated by the local regulatory authorities comes a few days after new difficulties for the second Swiss bank which saw its stock price fall by 25.5% last week.
But the authorities’ decision to erase the value of Credit Suisse’s “Additional Tier 1” (AT1) bonds, which angered their holders, increased market nervousness.
“Last week when we were talking about SVB and Signature, we were only talking about depositors and not asset quality,” said Steven Major, global head of fixed income research at HSBC. “There, we moved to Europe and we look at the assets (…) All those who said that you cannot compare subprime mortgages and subprime bonds with this crisis (…) Well, actually, things have changed.”
Also this weekend, five of the world’s largest central banks agreed to improve the supply of US dollars to global markets by increasing the frequency of currency swaps in an attempt to ease tensions on markets.
With the current market volatility, observers are increasingly expecting the Federal Reserve to curb the pace of rate hikes on Wednesday.
VALUES TO FOLLOW:
➦ STOCK EXCHANGE-Values to follow in Paris and Europe
AT WALL STREET
Wall Street is expected to be in the red after having already lost ground on Friday after a week marked by turmoil in the banking sector and worries about a possible recession.
The Dow Jones Index .DJI fell 1.19%, or 384.57 points, to 31,861.98 points, the S&P-500 .SPX , fell 43.64 points, or 1.10%, to 3,916, 64 points and the Nasdaq Composite .IXIC by 86.76 points (-0.74%) at 11,630.51 points.
The .SPXBK Banks Compartment posted its biggest two-week decline since March 2020.
In stocks, First Republic Bank FRC.N plunged 32.8% after the announcement of a dividend suspension, erasing gains made by an unprecedented $30 billion bailout for major financial institutions.
IN ASIA
Fears about a potential crisis in the global banking sector are also affecting Asian markets. The Nikkei in Tokyo .N225 lost 1.42%. In China, the decline of the main indices in mainland China is limited by new monetary easing measures.
The CSI 300 Index .CSI300 and Shanghai SSE Composite .SSEC fell 0.5%.
RATES/EXCHANGES
The yield on ten-year US government bonds fell to 3.343%, continuing the decline that began on Friday, favored by renewed risk aversion.
On the European market, the ten-year Bund yield lost more than 15 basis points, to
1,985
%, the lowest since mid-January.
The variations are stable on the currency side. The dollar index, which measures the fluctuations of the greenback against six major currencies, nibbled 0.03% .DXY while the euro advanced to 1.0661, down -0.05% EUR= .
OIL
The oil market fell for the second session in a row, due to fears of a recession which would lead to a reduction in demand.
Brent LCOc1 lost 2.43% to 71.2 dollars a barrel and US light crude (West Texas Intermediate, WTI) CLc1 2.53% to 65.05 dollars.
NO MAJOR ECONOMIC INDICATOR ON TODAY’S AGENDA
(Laetitia Volga, editing by Kate Entringer)