Crushing the flickers of optimism that followed yesterday's improvement in risk sentiment, the cyclonic conditions that hit the US mainland last week slammed full force into Europe overnight.

The share price of troubled Swiss Bank Credit Suisse tumbled 32% to its lowest price ever of CHF 1.70 per share on confirmation that the bank's largest shareholder, the Saudi National Bank, would not add to their stake in the stock.

French Bank, BNP Paribas said it would no longer accept so-called novations where BNP is asked to step in on derivatives contracts on which Credit Suisse is a counterparty.

Ironically, I worked at BNP Paribas in Australia over a decade ago when a similar thing occurred there during the European Sovereign crisis.

The Swiss central bank, the SNB, has since pledged to provide CSFB with emergency funding if necessary, hoping to restore confidence. However, for a poorly run bank whose share price pre-the GFC traded above CHF 83.00, its fate is uncertain, and a bailout may soon be required.

Caught in the downdraft, the FTSE fell 4.15% to close at 7344, wiping a cool £75bn from the UK benchmark index, while the German Index, the DAX, fell 3.49% to close at 14375.

Now for some good news. The overnight shockwaves mean the ECB will be unable to deliver on its pre-commitment to raise rates tonight by 50bp. It will most likely be 25bp at best, and the ECB's Terminal rate is now viewed at 3.11%, a dramatic repricing after being at 4% early last week.

More broadly, the woes of the global banking sector mean that inflation is yesterday's problem. And to a certain extent, the past week's events have done the dirty work of central banks and will dampen inflation. Higher funding costs, stricter regulation, lower margins, and capital raises will restrict the flow of credit to the economy, and both growth and inflation will inevitably slow.

CSFB share price weekly chart