Credit Suisse shares rally after £45bn lifeline pledged
SHARES recouped some of the billions they lost on Wednesday, after Credit Suisse said it was getting a £45billion emergency support package from the Swiss central bank.
The FTSE 100 gained just under one per cent yesterday, after suffering its largest fall in more than a year due to fears about the health of the financial sector.
They were sparked first by the collapse of SiliconValley Bank in the US and then Credit Suisse’s cornerstone investor Saudi National Bank refusing to inject fresh funds to prop up the banking giant.
However, news that the Swiss National Bank is providing Credit Suisse with emergency funds steadied markets, with UK banks rising 1.9 per cent, having lost 5.6 per cent in the panic the day before.
Lloyds Banking Group climbed 3.5 per cent, while HSBC added 1.9 per cent and Barclays rose 3.1 per cent.
But observers noted that the markets were still jittery and the respite could prove to be temporary.
Silvia Dall’Angelo, senior economist at Federated Hermes, said: “Markets have calmed down following intense stress engulfing Credit Suisse and European banks yesterday.
“Policymakers have swiftly stepped in to provide additional backstops, which has shored up confidence and contained contagion risk...for now. Crucially, the Swiss National Balk provided a lifeline. However, the situation remains fluid, as the markets’ sentiment remains fragile.”
Craig Erlam, Oanda senior market analyst, said: “Authorities may have thrown their support behind the banking sector while managing the collapse of midtier institutions in the US. But traders are far from convinced that the worst is behind us. Especially if central banks persevere with hikes.”
Charles-Henry Monchau, Syz Bank’s chief investment officer, said that while the £50billion lifeline handed to Credit Suisse and the bank’s decision to buy back some of its bonds or IOUs held by investors had calmed nerves, “these measures are not sufficient for it to be completely out of trouble”.