Europe open: Shares cautious at opening on Credit Suisse warning
European shares opened in cautious mood on Monday, as Credit Suisse warned of significant losses after a US client defaulted on margin calls.
The pan-European Stoxx 600 index was flat at 0855 BST.
Shares in Discovery and Viacom CBS slumped on Friday, after a fund called Archegos Capital Management started a fire sale of its assets. Credit Suisse and Nomura were forced to issue warnings on Monday morning about losses relating to the margin call default, with the Swiss institutions shares down more than 9%.
"Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions. While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month," the bank said.
Spreadex analyst Connor Campbell said it was unclear "whether Archegos is done with its fire sales, and, if it isn’t, how much it has left to unload".
"That also raises questions over the wider ramifications of the hedge fund’s troubles, and which companies will be the next to announce they have been stung," he said.
Investors were keeping a wary eye on the row between AstraZeneca and the EU over vaccine provision with the 27-member bloc threatening to block the pharma giant exporting any does until it met contractual promises on supply.
“The virus situation in Europe continues to deteriorate and Germany delaying the EU Recovery Fund will not help the zones economic position,” said Rony Nehme, chief market analyst at Squared Financial.
“The market is still long but the story of US outperformance on the back of a swift vaccine roll out while Europe lags behind is becoming stronger. Equities were volatile at the end of last week and we expect the same again this week – which will be shortened with the Good Friday holiday – as we see funds managing their quarter end positioning.”
Oil prices fell as the cargo ship blocking the Suez Canal was partially refloated, raising hopes the vital route could re-open and allow backed-up container traffic to get through.
“The oil price has of late been drifting on concerns that hopes for the resumption of demand has been overstated, although it remains strongly ahead by 22% so far this year,” said Richard Hunter at interactive investor.