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| Europe's Banking Sector Faces Volatility Ahead of ECB Rate Decision |
Credit Suisse shares surge after Swiss National Bank provides $53.94bn lifeline
Shares of Credit Suisse surged by more than 20% in early trading on Thursday after the Swiss National Bank and financial regulator, FINMA, pledged support with a $53.94bn lifeline for the beleaguered lender. However, a broader rally across Europe's banking sector subsequently waned with the looming decision on interest rates by the European Central Bank (ECB) creating uncertainty. The ECB had been signalling a 50-basis-point hike, but recent turmoil, which has included two US bank collapses, has made markets uncertain whether it will be a 50bps or a 25bps hike. Bond traders are confident enough to sell safe-haven government bonds, although some experts are concerned that the ECB may not be paying sufficient attention to potential risks from the banking sector.
MSCI Asia-Pacific shares index falls to 2023 low after Credit Suisse loan
Following the announcement that Credit Suisse will receive a $53.94bn loan from the Swiss National Bank and financial regulator, FINMA, MSCI's Asia-Pacific shares index fell 1% to its lowest level of the year, causing widespread concerns over contagion. Japan's bank shares, which are also viewed as vulnerable to interest rate rises, ended down 3.25%. Although the situation is not yet one of insolvency, some are nervous about contagion, while others worry about the unknown risks that may be lurking in the financial system. It is still too early to predict the outcome, with the possibility of Credit Suisse being taken over viewed as one potential outcome.
US Treasuries see best week since 1987
Two-year US Treasuries had their best week since 1987 as yields, which fall when prices rise, fell more than 60 basis points since Friday. The euro rose 0.2% higher against the dollar to $1.059, and the Swiss franc was up 0.8% at 0.9258 to the dollar. The yen remained strong, rising 0.4% against the dollar in London trading to 132.35, as investors continued to opt for safety. Oil prices rose after sliding to 15-month lows in the previous session, with Brent crude futures up 60 cents or 0.8% at $74.29 per barrel and West Texas Intermediate crude futures (WTI) at $68.08 a barrel.
ECB's Interest Rate Decision Looms Amidst Banking Sector Crisis
The banking sector crisis in Europe continues to generate concerns, as Credit Suisse's $53.94bn loan from the Swiss National Bank and financial regulator, FINMA, has sent shockwaves across the banking sector. Although Credit Suisse's shares initially surged more than 20% after the announcement, broader European banking shares have given back most of their 2.5% morning rally, amid uncertainty ahead of the European Central Bank's interest rate decision. With ECB President Christine Lagarde having signalled a 50-basis-point hike, the last week of turbulence, which included two US bank collapses, has left markets unsure whether the hike will be 50bps or 25bps. Although bond traders have shown confidence in selling safe-haven government bonds, many experts are concerned that the ECB may not be paying sufficient attention to the potential risks from the banking sector.
