UBS shares sink after Credit Suisse buyout

It is no secret that the trouble in the banking industry has been the main topic of discussion and mover of markets over the past week or so as governments and central banks scrambled to try and find a solution to the collapse and potential collapse of major names in the sector. Some of these efforts involved clients in the US being reassured that their funds would be available in an effort to prevent a further bank run while the headlines in Europe have all been surrounding the ongoing Credit Suisse debacle which some say may threaten the stability of the financial system in the continent. Over the weekend, in an emergency meeting, several parties discussed alternatives and options aimed at salvaging the bank and giving relief to investors and the markets as we saw Credit Suisse’s share price tank to their lowest levels as nothing seemed to help over the last week, not even news of a 50 billion CHF liquidity injection by the Swiss National Bank. As some expected would happen, UBS, the largest bank in Switzerland, as part of a deal brokered by the government will purchase Credit Suisse for 3 billion CHF and receive additional 9 billion CHF in government guarantees. On top of that, additional liquidity to a combined entity will also be provided in an effort to stabilize the situation. However, while initially this may have brought some calm to the market, share price of UBS dropped over 14% as investors continued to be on edge and as uncertainty returned. One of the main concerns could involve the fact that the UBS takeover of Credit Suisse leads to an interesting and potentially dangerous situation in the Swiss banking sector as merging the two largest Swiss banks means that over 50% of bank deposits in the country will be held by a single institution which in itself could be a serious risk if another bank run were to occur. As more details emerge and as the week progresses, there will be many events to keep an eye on including the central bank decisions that continue to be more relevant than ever as challenging macroeconomic situations now meet major headlines and banking scandals. This could prove to be one of the most volatile weeks of 2023 so far on the markets as investors flee to risk-off assets. 

Gold reaches highest level in a year as investors seek safe haven

The upward move which started for the price of gold on the 8th of March is continuing at the beginning this week as risk-off moods on the financial markets provide support for safe haven assets. While news of UBS buying the troubled Swiss lender, Credit Suisse, in a government-brokered deal provided some short term relief, it failed to ease market concerns as the deal will include write down of Credit Suisse's AT1 bonds and may turn out to be a hit to banks and other institutions with exposure to Credit Suisse. Following these market moves, gold rose over 1% today, breaking through the key $2,000 per ounce level this morning and reaching the highest level since March 2022 before pulling back and retesting Friday's highs.