The initial slump was halted as investors digested the support efforts and the pace at which they had come, while the European Stoxx 600 index moved into positive territory
London — Europe’s bank shares fought back from an early slump on Monday and a cross-asset scramble for safety looked to have eased, as markets weighed up the implications of the emergency rescue of banking heavyweight Credit Suisse for the financial system.
But the losses in banking shares were cut to 2.5% as investors digested the support efforts and the pace at which they had come, while the broader European Stoxx 600 index even managed to make it into positive territory. “There is a lot of firepower from the authorities to counter what is the steadily eroding loss of confidence,” Alster said.
Risk aversion had also seen the spread between riskier Italian debt and German debt widen out to more than 200bps again, but that gap — which reflects how much more Rome has to pay to borrow than Berlin — also improved. Not only did they discover they are the only investors not getting any compensation from the rescue, but that the long-established practice of giving bondholders priority over shareholders in debt recovery had been turned on its head.
“Additional tier 1 is and will remain an important component of the capital structure of European banks,” they said.
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