FirstFT: Global equities fall | Financial Times

Good morning. Shares in Europe and Asia are falling today after a frantic weekend of talks to sell Credit Suisse failed to quell investors’ questions about the health of the global banking system.

Shares in UBS are among the heaviest fallers after the Swiss bank agreed to buy its beleaguered rival for $3.25bn following an intervention by regulators.

UBS agreed to pay about SFr0.76 a share in its own stock, up from an earlier bid of SFr0.25 that was rejected by the Credit Suisse board. The offer remains far below Credit Suisse’s closing price of SFr1.86 on Friday.

As part of the deal announced yesterday evening, Switzerland’s national bank has offered a SFr100bn liquidity line backed by a federal default guarantee. The government is also providing a loss guarantee of up to SFr9bn, but only after UBS has borne the first SFr5bn of losses on certain portfolios of assets.

The combination creates one of the biggest banks in Europe. UBS has $1.1tn of total assets on its balance sheet and Credit Suisse has $575bn.

But under the terms of the deal, some of Credit Suisse’s additional tier one bonds (AT1), which are designed to take losses when institutions run into trouble and to transfer the risk of a bank failure from taxpayers to investors, are being wiped out.

As a result the prices of bank shares and bonds are down today across Europe. In Asia, markets fell as lenders like HSBC and Standard Chartered sunk in value and futures trading is indicating that US stock markets will also fall at the open of Wall Street today.

In a sign of the growing strains in the global financial system, the Federal Reserve and five other central banks yesterday said they would switch from weekly to daily auctions of dollars from today and run the daily swaps until at least the end of next month.

If like me you’re wondering about what to make of the rapidly growing crises on both sides of the Atlantic, I recommend reading:

Here’s what else I’m keeping tabs on today:

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Today’s top news

1. Top Democrats in Congress have called for a federal investigation into the role played by Goldman Sachs in the collapse of Silicon Valley Bank, and urged regulators to examine whether the investment bank’s profits handling a $21bn trade for SVB should be repossessed.

2. New York Community Bank has agreed to buy most of the operations of failed Signature Bank, including “substantially all” of its deposits and just over a third of its assets. Read the full story here.

3. EXCLUSIVE: The US proposal for a new carbon credit system has begun sizing up potential interest from countries and corporate backers to help finance the shift of poorer nations away from fossil fuels. Here’s how it could dovetail with “just energy transition” efforts.

4. Microsoft is preparing to launch a new games store on iPhones and Android smartphones as soon as next year if its $75bn acquisition of Activision Blizzard is cleared by regulators, according to the head of its Xbox business.

5. EXCLUSIVE: Big Pharma has asked for a slice of the US’s $280bn chip industry support package as part of an effort to build up the country’s biotechnology industry and stave off Chinese competition. Read more about the tax breaks and subsidies that drugmakers are requesting.

The Big Read

There are few problems larger than the climate crisis. But one potential solution is so small it cannot be seen with the naked eye: microbes. In 2019, Tegan Nock, a 32-year-old former rancher, co-founded farming start-up Loam Bio and has developed a microbial fungi that when applied to soil might not only improve its health but greatly enhance its ability to store carbon. These small but mighty micro-organisms could be the way forward.

We’re also reading . . . 

Chart of the day

After the global pandemic, Hong Kong and Singapore saw an opportunity to challenge traditional offshore financial centres such as the British Virgin and Cayman Islands. Rule changes have attracted pension funds and family wealth offices to the rival Asian financial centres. For Singapore, the strategy has been widely popular.

Take a break from the news

For anyone looking to buy a home near Lake Tahoe, higher mortgage rates are curbing what they can afford. As a result, home sales have fallen sharply and properties that are selling are going below the list price.

Additional contributions by Tee Zhuo and Annie Jonas