Europe’s stock markets are quiet after the morning’s crash as investors weigh in on the impact of UBS’ acquisition of Credit Suisse. Shares in Credit Suisse are down 60% and UBS shares are down more than 7%, but shares in other European banks are limiting their losses to less than 2%, although they fell as much as 6% this morning.

The pan-European Stoxx 600 index lost almost 2% earlier, but now rose by 0.25%: DAX in Frankfurt added 0.55%, FTSE 100 in London +0.20%, and CAC 40 in Paris – +0.61%.

On the Athens Stock Exchange, the overall index is now down 0.62% to 1,013 points from 998 points earlier.

Investors are trying to determine whether UBS’s acquisition of Credit Suisse, with significant support from Swiss authorities, will be enough to end the panic and reduce the risk of other European banks being infected. On the other hand, the banking crisis is expected to force central banks to raise interest rates to a lesser extent, which will help the economy develop favorably.

What spooked the market was the news that Credit Suisse’s additional Tier 1 (AT1) notes, which have a face value of $17 billion, will lose their entire value under the terms of the deal. Instead, the shareholders do not lose all their money, but receive about $3.3 billion.

With some bondholders insisting that investors in these securities have priority over shareholders, lenders are scrutinizing these issues to see if something similar happens in other countries where banks could run into trouble.

The $275 billion AT1 market shock has two-fold consequences for banks: firstly, it “freezes” the market for new AT1s and thus raises the cost of funding, at least for the riskiest banks, and secondly, it raises suspicion , since it is not known at this time what the exposure of banks to these bonds may be.

All eyes will now be on Wednesday’s Fed meeting as analysts appear to be divided on whether the US central bank will raise interest rates by 25 basis points or leave them unchanged.

On board the XA

In the Greek banking sector, Alpha Bank shares fell 0.42%, Piraeus Bank shed 1.41%, Eurobank shed 1.11% and National Bank shed 0.23%.

Down 1.69% on OPAP, 1.28% on PPC and 2.5% on engine oil.

Mytilineos rose by 0.83% and OTE by 1.95%.

Source: moneyreview.gr