UBS Group AG agreed to take over its longtime rival Credit Suisse Group AG for more than $3 billion, pushed into the biggest banking deal in years by regulators eager to halt a dangerous decline in confidence in the global banking system. The deal between the twin pillars of Swiss finance is the first megamerger of systemically important global banks since the 2008 financial crisis when institutions across the banking landscape were carved up and matched with rivals, often at the behest of regulators. The Swiss government said it would provide more than $9 billion to backstop some losses that UBS may incur by taking over Credit Suisse. The Swiss National Bank also provided more than $100 billion of liquidity to UBS to help facilitate the deal. Swiss authorities were under pressure to make the deal happen before Asian markets opened for the week. They had to walk a fine line, needing to get the two banks’ boards to agree to the deal and avoiding the alternative, a regulator-led winddown of Credit Suisse, which could have proven more protracted and painful for the financial system. The urgency on the part of regulators was prompted by an increasingly dire outlook at Credit Suisse. The bank faced as much as $10 billion in customer outflows a day last week, according to a person familiar with the matter.

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Despite opening on a positive note, the Switzerland stock market ended notably lower on Friday as worries about a potential banking crisis continued to hurt sentiment, prompting investors to lighten commitments. The benchmark SMI ended with a loss of 105.55 points or 0.98% at 10,613.55. The index, which advanced to 10,794.33 at the start, dropped to a low of 10,566.90 before staging a modest recovery. Credit Suisse, which rallied sharply on Thursday, rebounding after suffering a severe setback a session earlier, turned weak again today and ended with a big loss of 8%. Swiss Life Holding ended 3.4% down, Partners Group drifted down 3%, Swiss Re lost nearly 2.5%, and Richemont shed 2.27%. Zurich Insurance Group, Alcon, Holcim, Givaudan, ABB, UBS Group and Geberit lost 1.1 to 1.7%. Only Sonova (up 0.57%) and Roche Holding (up 0.17%), were the gainers in the SMI index. In the Swiss Mid Price Index, Zur Rose ended 5.28% down. Swatch Group ended lower by 4.23%, while Julius Baer and Temenos Group both lost about 3.1%. Flughafen Zurich, Adecco, Helvetia, Baloise Holding, Georg Fischer, Bachem Holding and Swiss Prime Site lost 1 to 2.5%. AMS rallied nearly 4%. SIG Combibloc and VAT Group gained 1.33% and 1.29%, respectively.

Despite some troubled U.S. and European banks securing some lifelines, European stocks closed lower on Friday as worries about a potential banking crisis rendered the mood quite bearish. The pan European Stoxx 600 ended 1.21% down. The U.K.'s FTSE 100 declined 1.01%, Germany's DAX fell 1.33% and France's CAC 40 dropped 1.43%, while Switzerland's SMI shed 0.98%. Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Ireland, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Turkiye ended with sharp to moderate losses. Iceland and Russia posted gains, while Czech Republic ended flat. In the UK market, BT Group tumbled more than 6%. ABRDN ended 5.55% down. Hiscox, Ocado Group, Rolls-Royce Holdings, Prudential, Smurfit Kappa Group, Legal & General Group, Melrose Industries and Aviva ended lower by 3 to 5%. Persimmon, HSBC Holdings, Mondi, Beazley, Kingfisher, Next, Lloyds Banking Group, Standard Chartered and B&M European Value Retail lost 2.5 to 3%. Endeavour Mining, Glencore, Fresenillo, Imperial Brands, Anglo American Plc and GSK gained 1 to 2.5%. In Paris, Renault ended nearly 5% down. Engie, Veolia, BNP Paribas, AXA, Publicis Groupe, Hermes International, Airbus Group, Saint Gobain, Carrefour and Credit Agricole lost 2 to 3%.

U.S. stocks fell on Friday as investors remained on edge about the risk of further bank failures, even after efforts to rescue First Republic Bank and Credit Suisse. The Dow Jones Industrial Average fell 384.57 points, or 1.2%, to close at 31861.98. The S&P 500 dropped 43.64, or 1.1%, to 3916.64. The technology-heavy Nasdaq Composite declined 86.76, or 0.7%, to 11630.51. Despite Friday's losses, the S&P and the Nasdaq ended the session with weekly gains of 1.4% and 4.4%, respectively, while the Dow turned in a small weekly loss. Some investors are hopeful that the fallout from bank failures will lead the Federal Reserve to pause its recent flurry of interest-rate hikes at next week's meeting. All 11 sectors of the S&P 500 fell on Friday, with financials posting the worst performance. Among the bright spots in the stock market was FedEx. Shares of the delivery giant jumped $16.26, or 8%, to $220.31 after it raised its outlook and said it would reduce costs. The parent company of Silicon Valley Bank filed for bankruptcy, easing a sale of its remaining assets after the technology-focused bank at the core of its business was seized by federal regulators. SVB Financial Group filed for chapter 11 protection on Friday in New York bankruptcy court, the largest bankruptcy filing stemming from a bank failure since Washington Mutual Inc. in 2008. Amgen Inc. on Thursday said it would lay off about 450 employees, or less than 2% of its workforce, as it faces increasing pressure from drug prices and high inflation.

Fears of a banking crisis weighed on the stock markets in East Asia and Australia on Monday. Bucking the regional trend, the Shanghai composite index is little changed after the Chinese central bank (PBoC) surprisingly lowered the reserve requirement for domestic banks and left key interest rates unchanged. In Hong Kong, however, the Hang Seng index is down 2.6 per cent. The Nikkei 225 index loses 1.3 per cent. In addition to economic concerns, the somewhat stronger yen also weighs on the Japanese stock market, as it worsens the chances of domestic companies on the export market.

In bond markets, the yield on the 10-year U.S. Treasury note fell to 3.395%, from 3.580% Thursday. Over the last two weeks the 10-year yield has fallen 0.567 percentage point, the largest two-week decline since March 2020.

UBS raises Inditex target to EUR 33 (31) – Buy

CS raises Lanxess target to EUR 47 (42) – Outperform

Citi lowers K+S to EUR 20 (22) – Neutral

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