Stock markets around the world slipped on Monday, with bank shares particularly hard hit, after Swiss regulators struck a deal on Sunday to rescue the country’s embattled bank Credit Suisse from the brink of a disorderly bankruptcy.
The takeover of Credit Suisse by UBS, the largest bank in Switzerland, was meant to calm the growing concern across markets about the health of the financial sector.
Anxiety among investors remains apparent, with markets falling in Europe and Asia, and futures suggesting that stocks in the United States will open lower too. Monday’s declines extend the relatively steep losses recorded on Friday, implying that the weekend’s moves to shore up banks — which in addition to the Credit Suisse takeover included a deal between major central banks to make dollar funding more readily available and an acquisition of parts of the collapsed Signature Bank in New York — have not put nerves at ease.
European markets opened lower, with banks in the spotlight. Shares of UBS fell about 10 percent in Zurich, as the risks and complexity of absorbing Credit Suisse gave investors’ pause. An index tracking Europe’s biggest banks slipped nearly 2 percent, amid a reassessment of the value of banks in general.
In Asia, markets closed with losses, with Tokyo’s Nikkei 225 down more than 1 percent and Hong Kong’s Hang Seng down more than 2 percent.
Stock futures for the S&P 500, which give investors the ability to bet on the index before the start of trading, fell 0.5 percent. On Friday, the S&P 500 slid 1.1 percent, its sharpest decline in a week.
The uncertainty continued to weigh on oil prices, reflecting worries that banking problems would put a damper on economic growth. Brent crude, the international benchmark, slid to nearly $70 a gallon, its lowest since late 2021. West Texas Intermediate oil slipped to $64.50 a gallon, also the lowest in more than a year.
The $3.2 billion acquisition by UBS of Credit Suisse, a hefty discount to the bank’s market value, was announced on Sunday by the Swiss Financial Markets Supervisory Authority. The country’s central bank, the Swiss National Bank, will lend up to 100 billion Swiss francs ($108 billion) to UBS to help it complete the takeover.
The deal brought to an end long-running doubts over the health of Credit Suisse that had been fanned by the recent collapse of California-based Silicon Valley Bank.
Shortly after the UBS acquisition of Credit Suisse was announced, the Federal Reserve and five other central banks, including the Swiss National Bank, unveiled a coordinated action to make sure dollars would remain readily available for short-term lending across the global financial system.
Separately on Sunday night, the Federal Deposit Insurance Corporation said it had entered into an agreement to sell the 40 former branches of Signature Bank, which was taken over by U.S. regulators on March 12, to New York Community Bancorp.
The UBS acquisition of Credit Suisse, which was brokered by the Swiss authorities, came after another weekend of frenzied activity by U.S. and European banking regulators.
“The worst was averted but as cooler heads prevail the question is whether UBS just got Credit Suisse very cheaply, or is the banking system as a whole very overvalued,” said Peter Tchir, global market strategist at Academy Securities.
Investors said they also expect Sunday’s Credit Suisse deal to cause ructions in debt markets because it wiped out a group of the bank’s bondholders. Investors who own stock in a company are typically last in line to be paid when a company is wiped out. But in this case, owners of stock in Credit Suisse received one UBS share for every 22.48 shares they owned, according to the terms of the deal.
The crisis in the banking sector continues ahead of a crucial meeting of the Federal Reserve on Wednesday. Many economists expect Fed policymakers to raise rates by a quarter-point, but market pricing suggests that traders are evenly split on whether the central bank will raise interest rates, continuing to turn the screws on an economy already showing signs of slipping from a year of rapid rate rises, or keep them unchanged. That is a remarkable turnaround from just a few weeks ago, when traders put a high probability on the Fed raising rates by half a point.
A number of small lenders in the United States came under renewed pressure last week. First Republic, which had been the subject of a rescue attempt by larger rivals that injected billions into the institution, fell more than 30 percent on Friday and premarket trading indicates another slide when markets open on Monday.
“Economists often underestimate the viciousness of market moves,” Holger Schmieding of Berenberg Bank wrote in a research note on Monday. “As fear begets fear, markets can fall by more and for longer than fundamentals can justify.”
Jason Karaian and Kevin Granville contributed reporting.
