FTSE 100, DAX 40 and S&P 500 continue to slide despite UBS takeover of Credit Suisse
Outlook on FTSE 100, DAX 40 and S&P 500 as the global banking crisis doesn’t seem to abate despite UBS’ takeover of Credit Suisse.
FTSE 100 continues to slide amid ongoing banking crisis
The banking crisis is ongoing despite UBS's Swiss government-backed takeover of its biggest rival Credit Suisse which entailed a complete write-down of Credit Suisse’s 16 billion Swiss francs (£14.16bn) worth of Additional Tier 1 bonds.
The FTSE 100 thus dropped to levels last seen in November to close to the 7,200 mark below which support can be spotted at the 7,105 early October high.
Were the index to stabilise, it would have to not only overcome the December trough at 7,296 but also the January low and the 200-day simple moving average (SMA) at 7,412 to 7,421.
Only a rise and daily chart close above Friday’s high at 7,511 could lead to a potential minor bottom being formed.
DAX 40 drops to early January lows post UBS takeover of Credit Suisse
The DAX 40 resumed last week’s sharp falls by dipping to 14,504, close to the 61.8% Fibonacci retracement of the December-to-March uptrend at 14,465, after this weekend’s UBS takeover of its closest rival Credit Suisse amid coordinated action by major central banks to boost US dollar liquidity last week.
Failure at 14,504 to 14,465 would bring the 6 January low at 14,386 and the late November low at 14,325 to the fore. Resistance can be found between the 19 January low and the 38.2% Fibonacci retracement at 14,904 to 14,940.
Only a rise and daily chart close above Friday’s high at 15,157 could repair the recent damage done to the DAX 40 October-to-March uptrend.
S&P 500 expected to open lower post UBS takeover of Credit Suisse
Despite coordinated action by major central banks to boost US dollar liquidity last week, the S&P 500 is likely to open lower on Monday, being dragged down by Asian and European equity indices which didn’t take the complete write-down of Credit Suisse’s 16 billion Swiss francs worth of Additional Tier 1 bonds at this week’s takeover by UBS lightly and are worried about further such write-offs occurring.
The write-down of these riskiest notes, introduced after the global financial crisis, marks the biggest loss yet for Europe’s £225bn AT1 funding market and had a negative impact on investor sentiment.
The S&P 500 thus trades back below the 200-day SMA at 3,930 and in case of a fall through Thursday’s low at 3,863 may retest last week’s lows at 3,832 to 3,809, a slip through which would then likely take the index back to its December trough at 3,764 and beyond.
Friday’s high at 3,976 would need to be exceeded on a daily chart closing basis for a bullish reversal to become possible.
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