Fear resurfaced in the financial markets, especially in the banking sector, due to the situation of the largest German bank, Deutsche Bank, which collapsed yesterday by 8.5% in the Frankfurt Stock Exchange, chaining three consecutive sessions down.
The reassuring statements of political leaders did not prevent falls in the main European markets: Paris fell 1.74%, Frankfurt 1.66%, London 1.26%, Milan lost 2.23% and Madrid 1.98%.
The week had started in the green on the stock markets, after the announcement of the purchase of Credit Suisse by its rival UBS, with which Switzerland sought to reassure investors.
(See: How Credit Suisse’s fall has damaged Switzerland’s reputation).
In the United States, the three main Wall Street indices closed the trading day in the green, despite the volatility in the European stock markets. For his part, he D.wow Jones gained 0.45%, like the Nasdaq stock market that closed at 0.22%. The S&P 500 index gained 0.36% in the last bell.
“The uncertainty spreading through the markets led the banking sector to lose all of its gains since the start of the year in a span of three weeks,” said Michael Hewson, an analyst at CMC Markets.
The expert does not perceive a “clear catalyst” to explain the bearish trend of the day, beyond the uncertainty about the prospects for future rate hikes and the effects that this could have on financial stability and the rest of the economy.
(See: The IMF alert: uncertainty due to the banking crisis is high).
New increases could penalize the most fragile banks and this makes fear new bankruptcies, after those suffered by three regional entities in the United States, including Silicon Valley Bank, which hit global markets hard earlier in the month.
The banking sector of the expanded Stoxx Europe 600 index fell 3.53%, after a sharp increase in the cost of insurance against the risk of default (CDS) of several European banks, with Deutsche Bank in the lead.
Battered, the first German bank lost 8.53% at the close, after having sunk more than 14%. Its rival, Commerzbank, fell 5.45%.
The oscillation of the CDS, a derivative associated with credit risk, concentrated attention. In the case of Deutsche Bank, the insurance that covers its debt indicates a probability of default of 27.4% in the next five years. For Commerzbank, this is 19.3%, according to the financial information agency Bloomberg.
However, this was not the only bank affected by the current situation. In Paris, the action of Societe Generale fell 6.13% and the titles of BNP Paribas cedir 5.27%; in London, Standard Chartered fell 6.42% and Barclays 4.21%. And in Madrid, the Santander 3% was left and BBVA, 4.43%.
The downward trend occurred despite recent measures by central banks to improve access to liquidity and efforts to restore confidence in the banking system.
The President of the European Central Bank (ECB), Christine Lagarde, reaffirmed the resilience of a banking system with “solid positions in terms of capital and liquidity”.
Additionally, the head of the German government, Olaf Scholz, and the French president, Emmanuel Macron, called to calm down the game, after the fall of the banks of each of their nations.
(See: Those responsible for the banking chaos must respond).
“The fear of contagion in the banking sector has not yet disappeared (…) The crisis will end when investors stop asking themselves: who will be next?said Neil Wilson, an analyst at Finalto.
Now helooking up at the United States, the Federal Reserve (Fed) this week it maintained its restrictive monetary policy with an increase, albeit modest, in rates.
Similarly, the European Central Bank and issuers in the United Kingdom, Switzerland and Norway maintained the same trend, in a context of concern about persistent inflation in the countries.
US Treasury Secretary Janet Yellen It said on Thursday that the authorities were prepared to take additional measures to prevent contagion in the financial sector.
That is why next Friday the official Yellen will meet with the main financial regulators of the country, including the chairman of the Federal Reserve (Fed), Jerome Powell.
European banks lose value in two weeks
According to information collected by EFE, the large European banks have lost more than 120,000 million euros in stock market value, since the intervention of Silicon Valley Bank (SVB). In the last two weeks, the main European banks are worth 13% less on the stock market, some 121,465 million euros.
(See: Fed chair aims to restore price stability).
In this period, Deutsche Bank, has lost 25% of its value, about 5,800 million euros, and Commerzbank, 23%, 3,400 million.
For its part, the Société Générale is worth 5,340 million less today, which represents a fall of 24.9%, and the French BNP Paribas, just over 8,300 million, 18.6% less. Similarly, the ING and Nordea banks have lost around 19% of their value, 16,700 million euros and 10,200 million euros, respectively; Unicrédit, 5,800 million (14.7%) and Intesa San Paolo, 49,100 million (9.6%).