The Paris Bourse is set to open lower on Monday morning, with the surprise announcement of the takeover of Credit Suisse by UBS having nipped in the bud the timid glimmers of a rebound that were emerging at the end of last week.

At around 8:15 a.m., the 'future' contract on the CAC 40 index - which has now switched to the April timeframe - was down 99 points at 6835.5, pointing to a decline of over 1% at the start of the session.

Last night, UBS announced its intention to take over Credit Suisse for three billion Swiss francs (around three billion euros), a decision that came as a surprise to many investors.

This forced marriage should once again penalize the shares of the major European banks, which have been at the heart of market concerns for a week now.

The accumulation of worries surrounding the sector is threatening to undo the good start to the year made by the European stock markets: after losing 4% last week, the CAC has held on to a gain of just 7% since January 1.

For analysts at Capital Economics, the outlook for the markets today remains "extraordinarily uncertain".

The structure of the Credit Suisse deal does nothing to help matters, forcing bondholders to take losses while protecting certain shareholders, which could pave the way for further upheavals in the days ahead", warns the London-based research firm.

The weight of bad debts and the impact of rising interest rates are likely to penalize the most fragile banks, raising fears of further bankruptcies.

The STOXX Europe 600 banking index has fallen by an eloquent 0.1% since the start of the year, reflecting this real crisis of confidence.

Investors are therefore preparing to face this week the same turbulence that has plagued the markets for the past ten days, namely a seemingly endless worsening of the global banking crisis.

Given the mistrust currently surrounding European banks, the Federal Reserve's Monetary Policy Committee meeting tomorrow and Wednesday is almost a non-event.

Nevertheless, the markets seem to be anticipating a change of course on the part of the Fed, which should be keen not to further destabilize a financial system already plunged into turmoil.

According to CME Group's FedWatch barometer, investors estimate a 48% probability of a status quo from the US central bank at the end of this week's FOMC meeting.

The remaining 52% are counting on a limited rate hike of 0.25 percentage points.

'If the Fed were to proceed with a 0.5% increase - which seemed quite possible just a week ago - the markets could be seriously shaken', warns Steven Bell, chief economist for Europe at Columbia Threadneedle Investments.

The erratic movements of the CBOE's VIX volatility index - often dubbed Wall Street's 'barometer of fear' - also point to wide market swings.

While some strategists assure us that the situation is not as serious as it was at the time of the 2008 financial crisis, the markets are set for high volatility this week, with big swings in the balance.

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