Shares of European banks rallied on Friday after Credit Suisse was offered liquidity financing by the Swiss National Bank, sparking a rebound in the bank’s shares.
A recovery in the banking sector led to a rise in European indices ahead of the European Central Bank’s monetary policy meeting.
Shares of Credit Suisse jumped 30 percent at the open, after sinking 24 percent on Friday. The Stoxx 600 bank index was 3 percent higher, with lenders Société Générale and Deutsche Bank, which fell sharply in the previous session, up 4 percent.
The Stoxx 600 area rose 1.3 percent, while Germany’s Dax and France’s Cac 40 index rose 1.7 percent. Britain’s FTSE 100 gained 1.5 percent.
The yield on the 10-year German Bunds, which on Wednesday saw the largest one-day decline since 1990, rose 0.11 percentage points to 2.22 percent, while the two-year note gained 0.17 percentage points to 2.55 percent.
The comeback for Credit Suisse comes after the bank announced it will have access to a SFr50bn ($54bn) liquidity backstop and buy back $3bn of debt. The bank’s shares fell on Wednesday after the chairman of Saudi National Bank, a major shareholder of Credit Suisse, rejected further investment, sparking turmoil in the global banking sector.
The sell-off was also prompted by the collapse of Silicon Valley Bank, which triggered a wave of concern over the bond portfolio of banking institutions and speculation that major central banks will be forced to rethink their aggressive interest rate hike agendas. Investors are uncertain whether the ECB will raise borrowing costs by a quarter or half a percentage point on Thursday.
“[It] seen as 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, director of credit trading at HSBC. “Because of the new solid data on activity and wages, we still expect both banks will move forward with rate hikes in March. However, financial stability considerations reinforce our view that the end of the tightening cycle may be near.
Asian equities fell on Thursday morning, although analysts at Deutsche Bank said the continent had “avoided the larger-scale decline witnessed in Europe and the US,” following the banking crisis.
Japan’s Topix shed 1.2 percent, South Korea’s Kospi lost 0.1 percent and Australia’s S&P/ASX 200 dropped 1.5 percent. Hong Kong’s Hang Seng and China’s CSI 300 fell 1.7 percent and 1.2 percent, respectively.
Japanese bank stocks continued their sell-off, with the Topix Banks index down 3.3 percent. Regional lenders Tochigi Bank and Keiyo Bank were the hardest hit, losing 4 percent and 3.7 percent respectively.
Futures tracking the blue-chip S&P 500 and Nasdaq Composite rose 0.1 percent and 0.3 percent, respectively. On Wednesday, the S&P 500 closed down 0.7 percent, while the Nasdaq Composite finished flat. JPMorgan Chase, the world’s largest bank by assets, fell 4.7 percent, while Morgan Stanley and Citibank lost more than 5 percent. The KBW Nasdaq Bank Index closed 3.6 percent lower.
San Francisco-based First Republic Bank, which has been hit the hardest by the fallout from SVB’s collapse, lost 21.4 percent.
The yield on two-year US Treasury notes, which is linked to interest rate expectations, fell 0.02 percentage points to 3.95 percent. The yield on the 10-year note was flat at 3.5 percent. Yields move inversely to prices.
In the currency market, the dollar index, which measures the greenback against a basket of six peer currencies, fell 0.4 percent. The euro rose 0.4 percent against the dollar, and sterling gained 0.2 percent after the spring budget in which chancellor Jeremy Hunt fully supported the energy bill and the Office for Budget Responsibility predicted that the UK would avoid a technical recession.
Brent and WTI crude, the US equivalent, rose 1 percent, after falling to $73.69 and $67.61 a barrel on Wednesday, the lowest levels since December 2021.