Investor fears ease as UK and US markets show signs of recovery

UK and US share prices bounce back as investor confidence returns

A day after authorities approved a rescue plan for struggling lending giant Credit Suisse, fears in the financial markets appeared to lessen.

On Sunday, the bank was acquired by rival UBS after regulators worked nonstop to ensure the transaction.

Markets rally as investor fears subside in UK and US
Investor sentiment improves as UK and US share prices surge

Its troubles, along with the failure of two smaller US banks, have raised concerns about the stability of the global financial system.

Share prices in Europe and the US rose on the expectation that the agreement would help contain the crisis.

The FTSE 100 in London gained almost 0.9% at the closing, regaining some of its earlier losses. Major indices in Europe also finished higher, with UBS up by almost 1.5% by day’s conclusion.

The three major exchanges in the US experienced varied results as concerns over First Republic, another regional bank, persisted.

Since the funding injection by 11 of America’s largest banks last week failed to reestablish trust in the bank’s future, shares of the San Francisco-based company fell more than 30%.

As officials worked to manage the problem, there were rumours of yet another attempt to stabilize the bank, whose shares have fallen as clients transfer their money.

Other banks’ stock prices in the US and Europe continued to decline.

A representative for British Prime Minister Rishi Sunak sought to reassure investors by stating that UK banks were “secure and properly capitalized” following the Credit Suisse emergency rescue.

It happened following similar remarks from central banks all across the world.

In order to ensure that banks had easy access to cash, six central banks, including the US Federal Reserve, also declared they would increase the flow of dollars throughout the international financial system.

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Experts do not anticipate a recurrence of 2008, when banks ceased lending to one another, despite the panic. A global recession resulted from the severity of the circumstances at the time.

The recent increase in interest rates has been difficult for banks, and as a result, some are sitting on substantial losses.

Due to it, Silicon Valley Bank and Signature Bank, two medium-sized lenders in the US, failed last week, raising worries that other banks would follow suit.

This confidence crisis has affected Credit Suisse, which had been losing money for some years but was otherwise well-capitalized.

The 167-year-old company is one of around 30 banks in the world that are considered too big to fail because of their significance to the banking system.

The second-largest lender in Switzerland, which has been plagued by scandals in recent years, was sold to UBS on Friday for just over $3.15 billion (£2.6 billion), a small portion of its $8 billion asking price.

Former UK CEO of UBS Mark Yallop stated that the transaction “should” reassure investors.

He said on the BBC’s Today show, “This is a takeover of a challenged institution with distinct idiosyncratic flaws that relate to it specifically [and are] not symptomatic of broader challenges in the financial markets.

It will wind down Credit Suisse’s investment banking activities, according to UBS Chairman Colm Kelleher, but it is “too early” to predict what will happen to jobs.

Over 74,000 people work for Credit Suisse, with 5,000 of them based in the UK.

“We need to do this in a calm, deliberate manner, after sitting down and analyzing what we need to do,” he said.

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