European stock futures lower; caution reigns despite central bank support

By Peter Nurse 

Investing.com - European stock markets are expected to open lower Monday, with investors remaining nervous despite central banks announcing emergency liquidity measures and a major bank consolidation in Europe.

At 03:00 ET (07:00 GMT), the DAX futures contract in Germany traded 1.3% lower, CAC 40 futures in France dropped 1.3% and the FTSE 100 futures contract in the U.K. fell 1.1%.

Swiss banking giant UBS (SIX:UBSG) announced on Sunday that it will buy embattled peer Credit Suisse (SIX:CSGN) for around $3.3 billion, with the assistance of the Swiss authorities, hoping that this will ease the strain on the global banking system.

Concerns had been growing about Credit Suisse’s survival as it faced growing liquidity difficulties with investors withdrawing funds in the wake of a series of crises.

The Federal Reserve and other major central banks followed this announcement by opening up dollar liquidity lines to support beleaguered lenders, making sure the banking sector as a whole can get their hands on dollars if needed.

Still, markets are likely to remain tense Monday, with UBS stating in the wake of Sunday’s merger that it will write down about $17 billion worth of Credit Suisse bonds, potentially causing more ructions.

This is all occurring before the Federal Reserve’s policy-setting meeting this week, with the U.S. central bank widely expected to increase interest rates again on Wednesday, this time probably by 25 basis points.

The Bank of England also meets this week amid doubts whether it will signal an end to its hiking cycle, while the Swiss National Bank is likely to hike on Thursday by 50 basis points even amid the turmoil in the country’s banking system.

It’s a quiet day in terms of scheduled corporate earnings, while investors will be keeping an ear open for comments from ECB President Christine Lagarde as she appears before the European Parliament’s economic committee. 

Oil prices fell Monday, continuing last week’s hefty selloff, on concerns the ongoing banking crisis would hurt global economic activity and thus crude demand this year.

Iraq's Prime Minister Mohammed Shia al-Sudani and OPEC Secretary General Haitham Al Ghais met over the weekend, and stressed the need for coordination among oil-exporting nations to ensure prices do not fluctuate in too extreme a manner, according to a statement.

A ministerial committee of OPEC and producer allies including Russia, known as OPEC+, is set to meet on April 3, with a full ministerial meeting planned for June 4. 

By 03:00 ET, U.S. crude futures traded 3% lower at $64.90 a barrel, after a 13% decline last week, its biggest weekly drop since last April. The Brent contract dropped 3.2% to $70.67 after a near 12% loss last week, its biggest weekly fall since December. 

Additionally, gold futures rose 1.1% to $1,996.05/oz, while EUR/USD traded 0.2% lower at 1.0650.