Market report

London rebounds from bank fears | Mears delay


UBS HQ in Zurich

4.30pm: Markets bounce back

There were some signs of greater stability in the markets after UBS’s $3bn acquisition of Credit Suisse was initially met with a sharp slide.

Shares in UBS opened nearly 10% down after its takeover of its Swiss rival was rushed through over the weekend.  However, the FTSE 100 and Wall Street rose in later trading.

“The shotgun wedding between UBS and Credit Suisse does seem to have diffused some of the tension from the global banking sector today, but investor confidence has been badly shaken and despite liberal applications of monetary putty there are still a few visible cracks,” said Danni Hewson, AJ Bell head of financial analysis.

Investors, however, expressed dismay at the deal’s structure and there is a threat of legal action from one group as concern arose at the decision to write-down Credit Suisse’s alternative tier one (AT1) bonds to zero. They had been worth $16bn. 

An AT1 bond is a bond with insurance, which is then converted into equity if a bank falls below a certain, pre-decided strength or capital limit.

In the event of a bank’s collapse, these bondholders should be compensated ahead of shareholders, or offered equity. In this case the reverse was implemented.

The FTSE 100 plunged in early trade but closed 68.45 points higher at 7,403.85.

Investors seem torn between relief that Credit Suisse was not allowed to collapse and worries that it had to be saved in such a way in the first place.

Swiss authorities were widely supported for arranging a swift takeover of troubled Credit Suisse by UBS ahead of stock exchanges opening today.

Markets in Hong Kong, Tokyo and Sydney fell last night after the deal emerged, although Shanghai stocks edged up. Oil prices retreated.

The Hang Seng in Hong Kong lost 2.5% and the Nikkei 225 in Tokyo shed 1.1%. The Shanghai Composite Index gained 0.1%..

Central banks announced coordinated efforts to stabilise lenders including a facility to borrow US dollars if necessary.

The US Federal Reserve meets on Wednesday and the Bank of England on Thursday to decide on more possible interest rate hikes.

7am: FirstGroup rail extension

FirstGroup has secured a six month extension to its west coast rail franchise with the Department for Transport amid accusations it is a ‘reward for failure’.

Full story here

7am: Mears results delayed

Mears Group will delay its annual results announcement because of an “unanticipated” absence of the senior responsible for signing off the accounts.

Ernst & Young said that prior to this absence all audit procedures were progressing satisfactorily to achieve the planned release date of 30 March and has apologised unreservedly for this delay.

EY and Mears are engaged engaging a replacement senior statutory auditor and a new proposed audit close timetable “as soon as practicable”.

It said: “Once this process is complete, we will communicate the revised preliminary release date.”

The board of Mears emphasised that this delay is not because of any concerns relating to the 2022 financial statements.

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