Aurelia Butler

LONDON/TOKYO (Reuters) – Japan’s yen climbed on Monday as investors reacted nervously to UBS’ cut-price takeover of its beleaguered rival Credit Suisse.Under the deal, holders of $17 billion of Credit Suisse Additional Tier-1 (AT1) bonds will be wiped out. That angered some of the holders of the debt, who thought they would be better protected than shareholders, and unnerved investors in other banks’ AT1 bonds.The yen – long seen as a safe haven at times of stress – rallied as a fall in Asian bank stocks overnight spread to Europe on Monday.The dollar slid to its lowest since Feb. 10 at 130.55 yen and was last down 0.66% at 130.96.”The immediate concern now is that AT1 bonds were completely written down, which is contrary to convention because equity holders are supposed to be higher risk than bondholders,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “That’s disconcerting to a lot of people.”Europe’s banking stocks index fell almost 6% in early trading but was last down 1.65% as nerves appeared to settle somewhat.The euro was up 0.26% against the dollar at $1.069, while the British pound was 0.32% higher at $1.222.The dollar rose 0.22% against the Swiss franc to 0.928.As part of regulators’ efforts to shore up confidence in the global banking system, central banks moved on Sunday to bolster the flow of cash around the world.The U.S. Federal Reserve offered daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the euro zone would have the dollars needed to operate, echoing actions taken during the COVID crisis of 2020. Graphic: Fed currency swaps have seen little recent use https://www.reuters.com/graphics/USA-FED/SWAPS/jnpwyjwonpw/chart_eikon.jpg U.S. BOND RALLY WEIGHS ON DOLLARAnalysts said the sharp drop in U.S. bond yields made the dollar less attractive and reduced its appeal as a safe-haven asset.The U.S. dollar index – which measures the currency against six major peers – was down 0.26% at 103.53, following last week’s 0.73% fall.RBC’s Tan said the yen is “the cleanest safe-haven in FX”, given the fall in U.S. yields.Yields on 10-year U.S. Treasury notes were down 3 basis points to 3.365% on Monday as investors moved into government bonds, which are seen as safe assets, and bet the Federal Reserve would now struggle to raise interest rates much further. U.S. 10-year yields, which move inversely to prices, stood at a 16-year high of 4.091% at the start of March.The Fed’s latest rate decision is due on Wednesday and adds an additional layer of uncertainty. Rates currently stand at 4.5% to 4.75%. Traders now think there’s a 60% chance of no change and a 40% chance of a 25 basis point increase later this week, according to derivative market pricing.They are positioned for a peak in rates in May at around 4.8%, followed by a steady series of cuts into the end of the year.”We continue to recommend a short USD/JPY trade, which is benefitting from the pick-up in risk aversion and less favourable financial market conditions,” said Lee Hardman, senior currency analyst at Japanese bank MUFG. To short means to bet on a fall in price.Australia’s dollar was 0.13% lower at $0.669. The U.S. dollar slipped 0.17% against its Canadian counterpart to C$1.371.In cryptocurrencies, bitcoin rose to a nine-month high of $28,567, last trading 0.87% higher at $28,291. More

Investing.com — The German economy is anticipated to shrink in the first quarter of 2023, the country’s central bank, the Bundesbank, said in a monthly report on Monday.It flagged that while consumer sentiment and business expectations brightened slightly at the beginning of 2023, they remain at relatively low levels.”All in all, German economic activity will probably fall again in the current quarter,” the Bundesbank said.Although the decline is projected to be smaller than in the last three months of 2022, when Europe’s largest economy contracted by 0.4% on a quarterly basis, two consecutive quarters of falling economic activity would signal that Germany has entered into a so-called “technical recession.”Despite the broader economic headwinds, the Bundesbank noted “positive” developments in the national labor market, adding that they expect unemployment to edge down in the coming months.Inflation in Germany is also seen decelerating “significantly” in March, with the Bundesbank highlighting that growth in energy prices, which had surged in the wake of the outbreak of the war in Ukraine, was almost at a “standstill.”Elsewhere on Monday, a spokesperson for German chancellor Olaf Scholz brushed off concerns that recent market turmoil sparked by failing banks was reminiscent of the 2008 financial crisis. Germany’s banking system, the spokesperson also said, was “well positioned” in the wake of the takeover of Credit Suisse (SIX:CSGN) by larger rival UBS (SIX:UBSG). More

Michael Fein, who headed Canadian firm Kingsdale’s U.S. operations as president, U.S., until the start of March, set up New York-based Campaign Management to offer advice and proxy solicitation services.”As campaigns become more nuanced and the stakes become increasingly higher, the difference between success and failure may very well rely on devising and executing the most effective strategy to drive positive results at the polls,” Fein said.He founded the firm amid fresh activist campaigns.Last week, billionaire investor Carl Icahn launched a board challenge at biotech Illumina (NASDAQ:ILMN). Earlier this year Nelson Peltz’s Trian Fund Management pursued a board seat at Walt Disney (NYSE:DIS) Co and Daniel Loeb’s Third Point pushed for Bath & Body Works to refresh its board. Activist investors are also agitating at Salesforce (NYSE:CRM).Innisfree M&A, Morrow Sodali, Mackenzie Partners, and Okapi Partners rank as the busiest proxy solicitors who advise on board challenges and mergers and acquisitions.Fein, who spent three decades on Wall Street, worked at Kingsdale Advisors for nearly six years and at Okapi before that. More

Investing.com — Credit Suisse collapses into the arms of local rival UBS in a $3 billion deal that rattles bondholders by wiping out $17B in junior debt, forcing European supervisors to put out a statement that they would handle things differently. The FDIC agrees to sell most of Signature Bank, and most mid-sized regional U.S. banks are inching up in premarket, but First Republic is still falling after another rating downgrade at the weekend. Stocks are holding up surprisingly well, with expectations of an earlier pivot in central bank policy supporting technology stocks in particular. Chinese President Xi Jinping begins a three-day visit to Moscow, only days after the International Criminal Court brought charges of war crimes against his host, Russia’s Vladimir Putin. And gold hits $2,000 for the first time in 11 months as havens soar. Here’s what you need to know in financial markets on Monday, 20th March.1. UBS to buy Credit Suisse for $3B; AT1 wipeout shocks junior bondholdersUBS Group (SIX:UBSG) agreed to buy Credit Suisse (SIX:CSGN) for $3B in a hasty deal brokered by Swiss authorities. Credit Suisse suffered catastrophic loss of deposits last weekend and is by far the largest bank to fail in the last decade.Controversially, regulators FINMA wiped out some $17B in junior debt – so-called Additional Tier-1 (AT1) bonds – as part of the rescue act, despite still allowing shareholders to receive some compensation. While that move was in line with Swiss law, it upset holders of AT1 debt across Europe, pushing bank stocks sharply lower.The move did, however, sidestep Swiss law by forcing the deal through without the approval of Credit Suisse shareholders. As such, some analysts said legal challenges are to be expected.2. Central banks agree swap lines to stem contagion; FDIC deal to sell SignatureThe Federal Reserve and other central banks moved at the weekend to stop contagion from spreading any further through the financial system, reviving a 2008-era instrument of mutual swap lines to backstop local demand for dollars.European Central Bank Christine Lagarde is due to address the EU Parliament at 12:00 ET (16:00 GMT) and is sure to be pumped for information on the strength of Eurozone banks, which face the biggest test of their soundness since the euro crisis a decade ago. The ECB and other European supervisory agencies issued a statement welcoming the resolution of Credit Suisse – albeit stressing that AT1 would be senior to equity in any bank resolution in the Eurozone.The Federal Deposit Insurance Corp. reached a deal to sell most of Signature Bank – one of the three U.S. institutions to collapse this month – to Flagstar, the owner of New York Community Bank. There appears little chance of its SigNet payments system – beloved of crypto platforms – being revived.The Fed’s efforts to underpin regional U.S. banks are still struggling to gain traction, with First Republic Bank (NYSE:FRC) stock marked down another 17% in premarket after Standard & Poor’s downgraded its debt again at the weekend.3. Stocks set to open mixed as bank woes continue to unsettle marketU.S. stock markets are set to open mixed as the rapidly unfolding situation in the banking sector saps confidence from the rest of the market.By 06:45, Dow Jones futures were down 13 points or less than 0.1%, while S&P 500 futures were up by a similar amount, and Nasdaq 100 futures were also up by 0.1%. The Nasdaq Composite defied pressure from the financial fallout last week, rising 4.6% on perceptions that the Federal Reserve will be forced to cut interest rates to stem the growing sense of crisis.Regional bank stocks remain front and center amid concern at the fate of First Republic, although PacWest (NASDAQ:PACW), Zions (NASDAQ:ZION), and Comerica (NYSE:CMA) stocks were all up in premarket.4. Xi to start 3-day visit to RussiaChinese President Xi Jinping begins a 3-day visit to Moscow, three days after the UN-backed International Criminal Court branded his host, Vladimir Putin, a war criminal.Xi will tread a fine line between supporting a strategic ally, Russia, and antagonizing the U.S. and Europe, whose economic slowdown is also bad news from China’s export-sensitive economy.Various reports have cited unnamed officials as saying Xi will hold talks with Ukrainian President Volodymyr Zelenskyy after his meetings with Putin, in an effort to appear even-handed. China recently enjoyed a boost to its diplomatic prestige after brokering a deal under which Saudi Arabia and Iran will renew their diplomatic relations.5. Gold hits $2k as oil slumps againGold prices topped $2,000 an ounce for the first time in 11 months, while industrial commodities were mixed on concerns that financial instability will cause a sharp slowdown in advanced economies later this year.By 06:45 ET, gold had retreated to $1,966/oz from a high of $2,014/oz, while U.S. crude oil futures were down 1.6% at $65.88 a barrel and Brent was down 1.6% at $71.81 a barrel.Iron ore futures in China fell 2.5%, and nickel fell 1.1% in London, but copper futures edged 1.1% higher, and aluminum rose 0.6%. More

Here’s a look at the European Central Bank’s “toolbox”, which has been expanded over the past 15 years in response to the global financial crisis of 2008, the ensuing euro zone debt crisis and the COVID-19 pandemic.EMERGENCY LOANSThe central banks of the 20 countries that share the euro can grant Emergency Liquidity Assistance to their lenders, with the ECB’s approval only needed above a certain threshold.The big advantage of ELA over other forms of central bank funding is the broader range of collateral acceptable against the loans, including junk bonds, which helped Greek banks during their 2015 crisis.A central bank needs the ECB’s approval if it wants to provide ELA for more than a year. LONG-TERM LOANSThe ECB can reactivate its Targeted Longer-Term Refinancing Operations (TLTRO), offering banks multi-year loans at low interest rates. This would mark something of a U-turn for the ECB, which is phasing out this cheap funding as part of efforts to fight inflation by raising borrowing costs. Banks continued repaying their existing loans last week despite the Credit Suisse crisis.The TLTRO requires banks to post higher quality collateral or take a hit on its value, which could prove a constraint in times of crisis.BOND PURCHASESThe ECB’s instrument of choice – along with most other major central banks – for nearly a decade when it needed to steady financial markets. But the ECB has also been reducing this form of money printing to raise the cost of credit. Stepping up purchases now would run counter to the fight against inflation.The ECB has a number of bond-buying schemes.If a full-blown banking crisis revives a doom loop between lenders and the governments that need to bail them out, the most suitable schemes may be the Transmission Protection Instrument and Outright Monetary Transactions (OMT), both of which are untested.Announced last summer, the TPI allows the ECB to buy unlimited amounts of a country’s bonds if it feels it is being unjustly punished by the market and the turmoil risks disrupting euro area monetary policy.OMT requires the country in distress to sign up for a bailout from the European Union. Unveiled at the height of the euro zone financial crisis by then ECB President Mario Draghi, the scheme quashed speculation of a break-up of the currency bloc but never came close to being used. More