At the final gong, the Paris index climbed 1.27% to 7,013 points, benefiting from a marked easing in banking stocks. This morning, the CAC40 plunged by almost 2%, weighed down by the heavy losses of Société Générale and BNP Paribas, which dropped 7% and 5% respectively, compared with -0.8% and +1.7% at the close.

In the course of the day, the FED, the Bank of England, the Bank of Canada, the European Central Bank (ECB), the Bank of Japan and the Swiss National Bank (SNB) announced concerted measures to improve liquidity supply through permanent swap agreements (loans against collateral provided by banks) in US dollars.

Christine Lagarde has just declared that 'financial tensions could temper demand and do some of the work that would otherwise have been done by a restrictive monetary policy: without these tensions, we would have indicated that further rate hikes were necessary', a clever way of confirming that rate hikes are probably over, since they are no longer necessary.

And as if everyone were in agreement, the FED has just issued a statement in the same vein: "the current turbulence could encourage a fall in inflation via a 'shock' to confidence. Consumers who are more timid in the face of banking stress, and job vacancies that find takers in the face of 'perceived' economic risk, would be conducive to less pressure on wages".

With regard to the primary source of the 'stress', UBS announced last night its intention to buy Credit Suisse for 3 billion Swiss francs (around 3 billion euros), a decision forced by the Swiss banking authorities (FINMA) and the SNB.

The buyer, UBS, has been offered a credit line of ChF100 bn plus $9 bn of loss assumption (the 'CS' carries $14.000 bn in outstanding derivatives, with risk levels ranging from low to medium or high) after the merger, assumed by the State

Overall, and beyond Credit Suisse and the "regional banks", the weight of bad debts and the impact of rising interest rates are likely to penalize the most fragile banks, raising fears of further bankruptcies.

Given the mistrust currently surrounding European banks, the meeting of the Federal Reserve's Monetary Policy Committee, to be held tomorrow and Wednesday, is almost a non-event.

Markets nevertheless seem to be anticipating a change of course on the part of the Fed, which should be keen not to further destabilize a financial system already plunged into turmoil.

According to CME Group's FedWatch barometer, investors rate the probability of a status quo from the US central bank at the end of this week's FOMC meeting at almost 48%.

The remaining 52% expect a rate hike limited to 0.25 percentage points.

If the Fed were to raise rates by 0.5% - which seemed quite possible just a week ago - the markets could be seriously shaken", warns Steven Bell, chief economist for Europe at Columbia Threadneedle Investments.

The erratic movements of the CBOE's VIX volatility index (-3% on Monday) - often dubbed Wall Street's "barometer of fear" - also point to wide market swings.

While some strategists maintain that the situation is not as serious as it was at the time of the 2008 financial crisis, the markets are likely to be confronted with very high volatility this week.
On the interest rate front, after a sharp easing at the start of the morning (risk-off), the scores are returning to equilibrium: the OAT shows -3Pts at 2.6640%, US T-Bonds +8Pts at 3.487% compared with a low of 3.29%.... already 20Pts of intraday volatility.
The Euro is recovering from its -1.3% fall this morning to $1.0630: it is now down just 0.5% at 1.0725... again, unusual volatility.

In French company news, Aéroports de Paris (ADP) announced a framework agreement with GMR Airports Infrastructure Ltd (GIL), its partner in the airport holding company GMR Airports Ltd (GAL), initiating a process that should lead to a merger between GIL and GAL in the first half of 2024.

Orpea announced on Monday that it had finalized the terms of the additional financing obtained from its main banking partners at the beginning of the month.

Orange is set to implement a collective redundancy plan covering around 700 positions in the Orange Business division, according to Le Monde and Les Echos. The plan is due to be presented to union representatives.

Lastly, GTT (Gaztransport and Technigaz) reports that, for the fourth year running, it has taken first place in the INPI's ranking of ETI (intermediate-sized companies) patent filers, with 57 patents published in 2022.

Copyright (c) 2023 CercleFinance.com. All rights reserved.