GLOBAL MARKETS-Asian markets face volatile open after Swiss takeover

Jamie McGeever is a Reuters look at the day ahead in Asian markets.

Asian markets are poised for a volatile open on Monday after Swiss authorities said UBS is taking over Credit Suisse, a forced merger that investors hope will relieve the strain on the global banking system and prevent a full-blown crisis.

Two U.S. bank failures and Credit Suisse's implosion sparked unprecedented volatility in the U.S. interest rate and bond markets after a sudden burst of turmoil in the global banking sector.

Will it be enough to calm the horses? It's probably on the face of it. Investors who were already reeling from recent events will be hampered by asset writedowns worth billions of dollars.

With recent inflation much less than expected and following Friday's reserve requirement cut, the 1 year and 5 year loan prime rates are expected to be left at 3.65% and 4.30%, respectively.

The global banking and market turmoil swirling right now, a rate cut would not be a shock. The events in Europe and the United States will be a factor in the Asian market direction on Monday.

The World Index ended flat last week, the MSCI Asia ex-Japan rose 0.5%, the S&P 500 rose 1.5% and the Nasdaq rose by 4.5%, as a result of hopes that the Fed's rate-hiking campaign could be over.

The Fed is expected to make its latest policy decision on Wednesday. There will be no equity market able to ignore the seismic shifts in U.S. rates and bonds for a long time. Last week was historic:

The U.S. 2 s 10 s curve steepened by 50 bps last week, the most in at least a decade.

The MOVE' index of Treasury market volatility posted its biggest weekly rise since 2008, and fourth-largest since the index was launched two decades ago.

The damage to investors of all stripes from that level of volatility in one of the world's most liquid and systemically important securities can't be overstated. Those with direct exposure will suffer huge losses.

If all that was not enough, there will be geopolitical tensions on investors' radar. China's President Xi Jinping is in Moscow, his first international trip since securing a third term as president, visiting Russian President Vladimir Putin.

Xi wants to strengthen ties and cement his no limits partnership with Putin, who faces criminal charges over his Ukraine war.

There are three key developments that could lead to more direction for markets on Monday: