Global Stock Markets Decline, Credit Suisse Shares Plunge Over 60 Percent

European stock markets saw indices fall on Monday morning, with Credit Suisse shares plummeting over 60 percent as UBS acquired the bank at a significantly lower price than its recent market value. UBS shares fell by about nine percent.

The STOXX 600 index of leading European stocks was down 1.4 percent at 9:30 AM, after dropping nearly 4 percent last week. This morning, the London FTSE index slid 1.53 percent to 7,223 points, while the Frankfurt DAX fell 1.61 percent to 14,530 points, and the Paris CAC dropped 1.45 percent to 6,824 points.

Over the weekend, Swiss monetary authorities managed to broker a deal for UBS to purchase Credit Suisse for $3.2 billion, but with massive write-offs for the second-largest Swiss bank, leading to significant losses for Credit Suisse shareholders and bondholders.

This acquisition was supposed to calm investors in the markets, but they are questioning how deep Credit Suisse’s problems are, given that the bank agreed to the takeover at this price. As a result, the banking sector index fell 3.2 percent to its lowest level in three months.

Last week, financial markets were shaken by the collapse of two American banks, Silicon Valley (SVB) and Signature, as well as issues with several other banks, including First Republic.

Everyone Fears a Banking Crisis

To calm the markets, central banks, including the U.S. Fed, the European Central Bank, and the Bank of Japan, established a joint liquidity support program in the markets. However, it seems that the efforts of monetary authorities have not yet reassured investors. This is especially true as it was reported that last week, U.S. banks withdrew a record $153 billion from the Fed’s emergency liquidity program, while savers in the U.S. continue to withdraw deposits from banks.

As a result, U.S. futures indices are currently down between 0.7 and 1 percent, indicating a decline in stock prices on Wall Street at the start of trading on Monday.

Asian stock prices also fell. The MSCI Asia-Pacific index, excluding Japan, was down 1.6 percent around 9:30 AM. Meanwhile, the Japanese Nikkei index slid 1.4 percent, while stock prices in Shanghai, South Korea, Australia, and Hong Kong fell between 0.5 and 2.6 percent.

Nevertheless, everyone hopes that the UBS and Credit Suisse agreement will calm investors in the markets who fear the spillover of Credit Suisse’s problems to other banks, which could lead to a banking crisis.

-The market views it positively that one area of concern has been resolved. However, this does not address the issues of American banks, namely the withdrawal of deposits to safer banks – explains Jason Wong, a strategist at BNZ.

Dollar Stable, Oil Prices Fall

In the currency markets, the value of the dollar against a basket of currencies remains stable.

The dollar index, which shows the value of the U.S. dollar against the other six major world currencies, is around 103.83 points, down from 103.86 points on Friday evening.

The dollar’s exchange rate against the Japanese currency rose from 131.90 to 131.95 yen.

However, the U.S. currency weakened against the European currency, with the euro reaching $1.0675, compared to $1.0670 on Friday evening.

Oil prices, on the other hand, have further declined after dropping more than 10 percent last week. The price of a barrel on the London market weakened by 0.92 percent to $72.30, while on the U.S. market, a barrel decreased by 0.88 percent to $66.15.