The search for safe assets appears to have slowed as markets weigh the implications for the financial system of Credit Suisse’s emergency bailout.
The actions of the european banks recovered from an initial drop this Monday after the Historic Credit Suisse bailout backed by the Swiss state by UBS, which entailed huge losses for bondholders. Meanwhile, the search for safe assets appears to have slowed as markets weigh the implications for the financial system of Credit Suisse’s emergency bailout.
Sunday saw the most dramatic state intervention since the 2008 global financial crisis, with UBS buying Credit Suisse for $3.2 billion, an acquisition backed by promises of unlimited funding from major central banks. of the world.
Shares in European banks initially fell 6%, while Credit Suisse plunged 63% and its buyer UBS nearly 13%. However, as investors digested the support and the pace at which it had been delivered, a recovery was started. Bank shares rebounded and both the European STOXX 600 and UBS shares rose as much as 4%.
“Credit Suisse is our Lehman (Brothers) moment in Europe, but we recognize that and we’re not going to make the same mistake,” Close Brothers Asset Management chief investment officer Robert Alster said of the swift action by authorities over the weekend. of week.
According to Alster, the European Central Bank, the Bank of England and other organizations are aware of “what are the next gazelles that the lions will hunt”, that is, other large investment banks such as Deutsche Bank, BNP in France or Barclays in the United Kingdom. United.
“The authorities have a lot of firepower to counteract a loss of confidence that does not stop”Alster said. Traditional safe havens such as European bonds and gold rallied on initial jitters in stock markets.
Risk aversion had also caused the spread between riskier Italian debt and German debt to widen again above 200 basis points, but that spread was also ebbing.
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