With the fate of Credit Suisse finally decided, investors were preparing for another harrowing week of trading on Monday morning.
The Australian stock market was bracing for more pain at the open, with ASX futures over the weekend falling 98 points, or 1.4 percent, to 6,921. The losses would add to last week’s declines when the local bag suffered its worst weekly loss since September of last year, and its longest losing streak since the 2008 financial crisis, according to Commsec.
UBS has agreed to buy Credit Suisse, which should help contain the growing banking crisis that has been rocking global markets.Credit:Bloomberg
Market jitters arose when veteran fund manager Anton Tagliaferro, founder of Investors Mutual, said there was a “crisis of confidence in the international banking sector.”
“The banking system operates with confidence, so when people start to worry about counterparty risk, it’s a real problem,” Tagliaferro said over the weekend. Counterparty risk exists when there is concern that the bank you are dealing with may not be able to meet its obligations or is about to go bankrupt.
Despite the jitters, a more dramatic collapse should have been avoided following emergency talks in Switzerland over the weekend, which ended early on AEDT Monday with the announcement that global investment banking giant UBS will take over. Credit Suisse in a government-brokered deal.
Charging
UBS is paying 3 billion Swiss francs ($4.8 billion) for its rival in a share deal that includes extensive government guarantees and liquidity provisions. The price is less than half the 7.4 billion Swiss francs Credit Suisse was worth at the close of business on Friday.
Aside from rapid developments in the global banking sector, investors this week are focusing on the US Federal Reserve’s two-day policy meeting beginning March 21 (Wednesday AEDT), with all eyes put on whether the banking consequences will cause the most -he observed the central bank to stop its interest rate hikes.
On the home front, Reserve Bank of Australia official Chris Kent was scheduled to speak at an event in Sydney on Monday morning, with investors seeking his updated opinion on the Australian central bank’s policy stance and any concerns. about financial market contagion. .
