Oil and Asian markets tumble after Credit Suisse takeover by UBS

Oil prices and banking stocks tumbled overnight despite the historic state-backed rescue of troubled lender Credit Suisse by Swiss rival UBS Group.

In a package orchestrated by Swiss regulators on Sunday, UBS Group will pay 3 billion Swiss francs (£2.7bn) for 167-year-old Credit Suisse and assume up to $5.4bn (£4.4bn) in losses.

While the developments appeared to shore up investor confidence in early trading in Asian markets, the rally quickly evaporated as Credit Suisse bondholders took a massive hit.

Meanwhile, oil prices have sunk to their lowest level in two years as escalating investor concerns about the crisis in global banks eroded appetite for riskier assets such as commodities.

Brent crude, the international benchmark, has slumped 3.1pc already today towards $70 a barrel, where prices have not been since March 2021.

Under the Credit Suisse deal, the Swiss regulator decided so called additional tier-1 bonds – or AT1 bonds – with a notional value of $17bn will be valued at zero, creating new worries about the risks of high-yield debt issued by big banks.

Standard Chartered and HSBC shares each fell more than 6pc in Hong Kong to more than two-month lows, with HSBC facing the possibility of posting its largest one-day drop in six months.

The MSCI index for financial stocks in Asia ex-Japan was down 1.3pc.

Read the latest updates below.

07:43 AM

FTSE 100 on track to open lower

The FTSE 100 is expected to open lower after struggling bank Credit Suisse was sold to Swiss rival UBS.

London’s top index is on track to fall by around 1pc as it opens trading following a bruising session last week.

Markets in Asia were struggling earlier in the morning, with shares in Hong Kong falling by more than 3pc as the banking sector took a battering.

Michael Hewson, chief market analyst at CMC Markets, said:

Story continues

07:40 AM

Bond assets tumble in Asia after Credit Suisse writedown

Risky bank bonds tumbled in Asia, with some posting record declines after holders of Credit Suisse’s contingent convertible securities suffered a historic 16.3 billion franc (£14.4bn) loss.

The retreat was most pronounced in bonds designed to be among the first to face writedowns if an institution gets into trouble.

Bank of East Asia’s 5.825pc perpetual dollar note slumped 9.4 cents on the dollar to about 80 cents, according to data compiled by Bloomberg.

HSBC’s $2bn additional tier 1 bond fell much as 10 cents to around 85 cents on the dollar Monday, according to credit traders.

That drop would be its biggest daily drop since it began trading earlier this month.

UBS’s decision to buy rival Credit Suisse triggered a complete write down of the beleaguered lender’s convertible notes.

It was the biggest loss yet for Europe’s $275bn AT1 market, which was created after the financial crisis to ensure losses would be borne by investors not taxpayers.

07:30 AM

Oil prices plunge as investors shift away from riskier assets

Oil prices have sunk to their lowest level in two years as escalating investor concerns about the crisis in global banks eroded appetite for riskier assets such as commodities.

Brent crude, the international benchmark, has slumped 3.1pc already today towards $70 a barrel, where prices have not been since March 2021.

US-produced West Texas Intermediate has plunged 3.2pc below $65 a barrel, its lowest level since December 2021.

The decline comes despite Swiss authorities orchestrating a rescue of Credit Suisse by UBS Group over the weekend.

In addition, the Federal Reserve and five other central banks announced coordinated action to boost liquidity in US dollar swaps.

07:22 AM

Credit Suisse woes ‘don’t concern’ European banks, says French chief

France’s central bank chief has sought to distance European and French banks from the problems at Credit Suisse and banking woes in the United States.

Francois Villeroy de Galhau, a member of the European Central Bank’s governing council, told France Inter radio that Credit Suisse and the banking volatility in the US “don’t concern French and European banks”.

07:17 AM

Deutsche Bank has ‘near zero’ of worthless Credit Suisse bonds

Deutsche Bank has said its exposure to Credit Suisse’s Additional Tier 1 bonds was “near zero”.

Credit Suisse said on Sunday that 16 billion Swiss francs (£14bn) of the securities will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS.

07:10 AM

Markets alarmed as risky Credit Suisse bonds to become worthless

Markets have been alarmed by policymakers’ decision to prioritise Credit Suisse’s equity investors over holders of additional tier 1 bonds.

Credit Suisse’s AT-1 notes – previously valued at about $17bn (£14bn) – will become worthless as a result of the use of public funds for the rescue, potentially sending the $275bn (£226bn) market for bank funding into a tailspin.

Creditors are frantically poring through the fine print for these AT-1 securities to understand if authorities in other countries could repeat what the Swiss government did on Sunday.

The Swiss National Bank is offering a 100bn-franc (£198bn) liquidity assistance to UBS while the government is granting a 9bn-franc guarantee for potential losses from assets UBS is taking over.

Shares in European lenders are expected to decline today, extending last week’s rout, as sentiment remains fragile even after UBS agreed to buy Credit Suisse in a government-brokered deal.

Futures of the Euro Stoxx Banks Index were 3.8pc lower in Paris amid thin volumes.

The wider benchmark slumped 12pc last week, wiping out about 111 billion euros (£97bn) of market capitalisation and almost erasing gains made so far this year.

06:53 AM

Good morning

Shares in Shanghai, Tokyo and Hong Kong declined after Swiss authorities arranged the takeover of troubled Credit Suisse.

Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of US lenders Silicon Valley Bank and Signature Bank.

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What happened overnight

Asian stock markets fell overnight after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

Hong Kong stocks fell 3pc during afternoon trading as HSBC and other lenders tumbled, with traders fretting over the financial sector despite the UBS buyout of troubled Credit Suisse.

The Hang Seng Index slipped 3pc, or 586.66 points, to 18,931.93.

Tokyo shares ended lower, weighed by the concerns about the global banking sector as well as a stronger yen.

The benchmark Nikkei 225 index fell 1.4pc, or 388.12 points, to 26,945.67, while the broader Topix index lost 1.5pc, or 30.12 points, to 1,929.30.

Credit Suisse’s banking operations appeared to be running business as usual at its major offices in Asia.

Monetary authorities in Singapore and Hong Kong, where Credit Suisse hosts large regional offices, separately said the Swiss bank’s business continued without interruption.