The FTSE dropped by 1.5% due to decreasing prices in Asia and Europe, with UBS experiencing a significant drop of 12%.
London and European banking stocks experienced a decline on Monday, despite the attempted rescue of Credit Suisse by UBS, which failed to assuage market concerns. The FTSE 100 in the UK fell by over 110 points, equivalent to a 1.5% drop, primarily driven by London-listed banks such as Natwest, Barclays, and Standard Chartered, which were all down over 7%. Additionally, HSBC and Lloyds also experienced a decline of around 5% during early trading. The Stoxx Europe 600 Banks Index, which measures European banking shares, was down 4% on Monday morning, and all major indices showed a decline. Credit Suisse’s shares plummeted by 63%, while UBS was down 12%.
Francesco Pesole, a foreign-exchange strategist at ING in London, noted that the UBS acquisition of Credit Suisse over the weekend did not provide enough relief to market sentiment, and as a result, investors’ concerns have now shifted to the AT1 bond market.
To help restore confidence, central banks collaborated on Sunday night, agreeing on measures to ensure that banks in Canada, Britain, Japan, Switzerland, and the eurozone would have sufficient US dollars to operate. The US Federal Reserve, Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank have all announced that they will increase liquidity by conducting daily US dollar swaps. This change is a modest expansion of an existing programme in which the Fed pays dollars to other central banks each week in exchange for local currency.
London-based banking giants, which generate a significant portion of their revenue in Asia, experienced a 7% and 5% drop in Hong Kong trading. In addition, Bank of East Asia also fell by 3.5%. As a result, Hong Kong’s Hang Seng Index declined by 2.6%.
