Credit Suisse weighs on Europe’s stock exchanges

Credit Suisse weighs on Europe's stock exchanges

Nstart after the blackest September in 14 years Europe Stock exchanges with renewed losses in October. Dax and Euro Stoxx 50 fell on Monday by around 1 percent to 12,023 and 3288 points respectively.

The turbulence surrounding Credit Suisse made investors nervous, said Naeem Aslam, chief market analyst at brokerage firm Ava-Trade. The head of the ailing Swiss bank, Ulrich Körner, had emphasized the institute’s strong balance sheet in a message to the workforce. He was reacting to the sharp rise in so-called credit default swaps (CDS) on Friday. These are default insurances for bonds. This is very reminiscent of 2007, when the financial crisis was brewing, Aslam commented.

Based on the figures for the second quarter, he considers the institute’s capital and liquidity position to be good, emphasized analyst Kian Abouhossein from the bank JP Morgan. The increase in CDS must be seen in the context of the uncertain economic outlook. Default insurance has also recently become more expensive for other financial institutions. However, Credit Suisse shares in Zurich fell by up to 11.5 percent to a record low of CHF 3.52. The European banking index lost 2.4 percent.

U-turn in fiscal policy supports pound

Meanwhile, the price of Brent crude oil from the North Sea rose by 4.2 percent to $88.68 a barrel (159 liters). According to insiders, Opec+ is considering reducing production by one million barrels a day. It would be the largest cut since the outbreak of the coronavirus pandemic in early 2020. The likelihood of such a move is high, as any cut of less than 500,000 barrels per day would be met with a shrug from investors, analysts at ANZ Bank wrote. Against this background, the index for the European oil and gas industry rose by 1.5 percent, bucking the trend.

The pound sterling was also in demand, gaining up to 1.1 percent to $1.1279. After fierce resistance, the British government reverses itself and refrains from lowering the top tax rate. “From a market perspective, this is a step in the right direction,” said Jan von Gerich, chief analyst at Nordea Bank. The planned tax cuts had fueled doubts about the stability of Britain’s public finances and at times pushed the pound to a record low against the dollar. This called the Bank of England (BoE) into action, which had to calm the markets with a multi-billion dollar cash injection.

Among the German companies, United Internet and 1&1 moved into the limelight. The Internet provider and its mobile communications subsidiary increased their targets for the full-year operating result. “But that reads like an indirect profit warning if the investment targets are drastically reduced at the same time,” said one stockbroker. The shares of the two companies each gave way about half a percent.

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