The FTSE 100 was firmly in bounce-back mode on Friday as Credit Suisse held on to the gains from yesterday’s relief rally at the open.
AJ Bell investment director Russ Mould said: “Right now, the market’s fortunes appear to be tied to a prime slice of Zurich real estate which houses what seems to be Europe’s sickliest big bank. A merger with UBS at the behest of the authorities is apparently being resisted by both parties.
“Whether the efforts on the part of the Swiss government to prop up the bank prove sufficient, whether Wall Street’s injection into troubled regional institution First Republic overnight works, and whether there are any other vulnerable banks are likely to remain key considerations for investors. The dreaded c-word, contagion, certainly remains in the air.
“The pace and scale of the rate tightening cycle after a decade of virtually zero interest rates was always likely to reveal stresses and strains in the financial system but if central banks row back, they risk leaving inflation even more entrenched and fostering a sense of panic.
“The European Central Bank stuck to the plan with a 50-basis point increase yesterday, a move which actually seemed to reassure markets, and it will be interesting to see what the Federal Reserve and Bank of England do next week.”
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