The FTSE 100 gained on Monday after fears about the global financial system eased and investors stepped in to pick up beaten down stocks.
The FTSE 100 was nearly 1% higher at 7,476 at the time of writing, while the German DAX added 1.2%. A sharp rally in Deutsche Bank shares helped lift the mood in Europe.
“Bargain hunters were out in force for Europe’s banks following the chaos of the past few weeks. Deutsche Bank jumped more than 4% in early trading, regaining some of the territory lost last week when its share price plummeted,” said Russ Mould, investment director at AJ Bell.
Although Deutsche Bank shares found some support, the cost of insuring against the bank defaulting on their bonds still remained high. Deutsche Bank Credit Default Swaps (CDS) will be closely watched in the coming days and further increases could spark another wave of volatility.
In addition to stability in Deutsche Bank’s equity, news First Citizens Bank had acquired SVB assets instilled a sense the crisis was past its worst.
“Helping to repair sentiment towards the sector was the news that First Citizens Bank is to buy $72 billion of Silicon Valley Bank assets at a discount of $16.5 billion. Together with HSBC’s purchase of SVB’s UK operations and UBS’ takeover of Credit Suisse, investors will be hoping for some stability from now on in the broader sector,” said Russ Mould.
The positive developments at SVB and Deutsche Bank spilled over into the FTSE 100’s banks with Barclays, Natwest and Lloyds gaining on the day. Standard Chartered was still feeling the heat and trading in negative territory.
The gains elsewhere in the index were broad; 89 of the FTSE 100’s constituents were trading in positive territory at the time of writing.
