Europe Inventory Futures Fall Amid UK Turmoil, Credit score Suisse Woes

(Bloomberg) — European stock futures fell amid concerns over economic and political turmoil in the UK, and as the challenges facing Credit Suisse Group AG weighed on sentiment.

December contracts on the Euro Stoxx 50 Index fell as much as 2.4% in Asian morning trading hours and FTSE 100 futures declined as much as 1.8% before both pared losses. Volumes were thin amid holidays in China, South Korea and Sydney.

UK’s political turmoil has added to headwinds for Europe investors already grappling with the fallout of Russia’s war in Ukraine as well as global concerns tied to inflation and higher rates. The pound touched a record low against the dollar last week, while British and European stocks have tanked.

UK Prime Minister Liz Truss over the weekend said her government is sticking to a plan to remove the highest income tax rate despite the market upheaval it has spawned. Meanwhile, Russia’s state-controlled Gazprom PJSC suspended natural gas deliveries to Italy, escalating the energy crisis in Europe.

“In the UK, the fiscal plan looks really inflationary, at least the market reads it that way, and there’s a sense that the Bank of England will clamp down,” said Ilya Spivak, head of greater Asia at DailyFX. “So it looks like a bunch more tightening has entered the equation.”

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Credit Suisse

Meanwhile, investors are also watching developments surrounding Credit Suisse.

Ulrich Koerner, the new chief executive of Credit Suisse, sought to bolster employee and investor confidence in the bank after the cost of insuring its bonds against default climbed about 15% last week to levels not seen since 2009 and its shares touched a new record low on Friday.

Koerner, who was named CEO in late July, has had to deal with market speculation, banker exits and capital doubts as he seeks to set a path forward for the troubled Swiss bank. Analysts at KBW estimated that the firm may need to raise 4 billion Swiss francs ($4 billion) of capital even after selling some assets to fund any restructuring, growth efforts and any unknowns.

For Credit Suisse, “the size of the debt with the rising rates is driving the issue into the unknown depth,” said Hebe Chen, an analyst at IG Markets Ltd. Investors are losing faith in the ability of top leadership to stabilize the markets, she added.

(Adds more context on Credit Suisse in the penultimate paragraph.)

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