European bank stocks rallied on Thursday after Credit Suisse was offered liquidity financing by the Swiss National Bank, triggering a rebound in bank shares.
The recovery in the banking sector fueled a broader rise in European indices ahead of the European Central Bank’s monetary policy meeting.
Shares of Credit Suisse jumped 30% at the open, after falling 24% on Wednesday. The Stoxx 600 index of banks rose 3%, lenders Societe Generale and Deutsche Bank, which fell sharply in the previous session, rose 4%.
The region-wide Stoxx 600 rose 1.3%, while Germany’s Dax index and France’s Cac 40 climbed 1.7%. Britain’s FTSE 100 gained 1.5%.
Yields on 10-year German Bunds, which on Wednesday saw their biggest single-day drop since 1990, rose 0.11 percentage points to 2.22%, while two-year bonds gained 0, 17 percentage points to 2.55%.
Credit Suisse’s rebound came after the bank announced it would have access to a Liquidity guarantee of 50 billion Swiss francs (54 billion dollars) and redeem about $3 billion of its debt. The bank’s shares fell on Wednesday after the chairman of the Saudi National Bank, a major shareholder in Credit Suisse, ruled out new investment, sparking turmoil in the global banking sector.
The sell-off was also prompted by the collapse of Silicon Valley Bank, which sparked a wave of concerns about banking institutions’ bond portfolios and speculation that major central banks would be forced to rethink their aggressive bond-raising programs. interest rate. Investors are unsure whether the ECB will raise borrowing costs by a quarter or half a percentage point later Thursday.
“[It] it appears that a significant increase in market volatility has led investors to doubt the ability of the ECB and the Bank of England to raise rates further,” said Daniel Vaun, head of credit trading at HSBC. . “Given the recent strong data on activity and wages, we still expect both banks to continue their rate hikes in March. However, financial stability considerations have reinforced our view that the end of the cycle tightening could be near.
Asian stocks fell on Thursday morning, although Deutsche Bank analysts said the continent was “avoiding the larger-scale declines seen in Europe and the United States” after the banking crisis.
from Japan Topix lost 1.2%, South Korea’s Kospi lost 0.1% and Australia’s S&P/ASX 200 fell 1.5%. Hong Kong’s Hang Seng and China’s CSI 300 fell 1.7% and 1.2% respectively.
Japanese bank stocks began to sell off again, as the Topix Banks index fell 3.3%. Regional lenders Tochigi Bank and Keiyo Bank were the hardest hit, losing 4% and 3.7% respectively.
S&P 500 and Nasdaq Composite futures rose 0.1 and 0.3% respectively. On Wednesday, the S&P 500 closed down 0.7%, while the Nasdaq Composite finished flat. JPMorgan Chase, the world’s largest bank by assets, fell 4.7%, while Morgan Stanley and Citibank both lost more than 5%. The KBW Nasdaq Bank Index closed down 3.6%.
San Francisco-based First Republic Bank, which was hardest hit by the fallout from the SVB collapse, lost 21.4%.
The yield on two-year US Treasuries, which is closely tied to interest rate expectations, fell 0.02 percentage points to 3.95%. The yield on the 10-year note remained stable at 3.5%. Yields move inversely to prices.
In the foreign exchange markets, the dollar index, which measures the greenback against a basket of six comparable currencies, fell 0.4%. The euro rose 0.4% against the dollar and the pound gained 0.2% after the spring budget in which Chancellor Jeremy Hunt extended support for the energy bill and the Office for Budget Responsibility predicted that the UK would avoid a technical recession.
Brent and WTI, the US equivalent, rose 1%, after crashing to $73.69 and $67.61 a barrel respectively on Wednesday, their lowest levels since December 2021.