Global markets remain under pressure. In the wake of the sharp drop in Deutsche Bank, which lost almost 10% on the Frankfurt Stock Exchange on Friday March 24, European stock markets fell by almost 2% in the afternoon.
The President of the European Central Bank (ECB), Christine Lagarde, however reaffirmed Friday the solidity of the banking system of the euro zone with the leaders of the European Union (EU), meeting at the summit in Brussels. “As far as financial stability is concerned, the ECB has all the necessary tools to provide liquidity to the eurozone financial system, if necessary,” she assured.
The German Chancellor, Olaf Scholz, wanted to be reassuring about the state of health of Deutsche Bank, the first German bank. “Deutsche Bank has fundamentally modernized and revamped its business model and is very profitable. There is nothing to worry about,” he said after the summit.
Wall Street opened lower, with the Dow Jones dropping 0.57%, the Nasdaq 0.54% and the broader S index
Bypassing Western Sanctions
The banking sector of the broader Stoxx Europe 600 index, for its part, fell by 4.04%, after a sharp increase in the cost of insurance against the risk of default (CDS) of several European banks. This hedging tool in the event of debt default has increased for most European banks, but less than for Deutsche Bank. It was therefore among the most affected on the stock market, with a fall of 9.49%, after having sunk more than 13%. Commerzbank lost 6.37% in Frankfurt.
In Paris, the Societe Generale share yielded 6.83%, the largest drop in the CAC 40 index, while BNP Paribas lost 6.67%. In London, Barclays lost 5.17% and HSBC 3.06%. Banco Sabadell fell by 4.16% in Madrid, ING by 4.08% in Amsterdam and Nordea by 7.86% in Copenhagen.
In Zurich, Credit Suisse fell by 6.24% and UBS by 4.97%. According to Bloomberg, these banks are among those suspected by American justice of having helped Russian oligarchs to circumvent Western sanctions. Contacted by Agence France-Presse (AFP), Credit Suisse did not wish to comment on the information and UBS did not respond.
In New York, the sector was also neglected, but to a lesser extent: JP Morgan Chase lost 1.62%, Morgan Stanley 3.49%, Goldman Sachs 2.39% and Bank of America 1.59%. The regional bank First Republic, particularly under pressure since the bankruptcy of SVB, dropped 3.59%.
“Fear of contagion”
“Fear of contagion” in the banking sector “hasn’t gone away yet,” notes Finalto analyst Neil Wilson, pointing to the sharp decline in European bank stocks on Friday, which is “weighing on overall sentiment.” of the market. The expert also asserts:
“As I have said many times over the past two weeks, the crisis will only end when investors stop wondering who will be next. And it looks like we’re not there yet. »
Sign of the nervousness of investors, the bonds of European States, assets considered low risk, were very popular. Germany’s 10-year debt rate, which moves inversely to the price of the bond, fell to 2.11% around 3 p.m. from 2.19% at Thursday’s close. Safe havens such as the dollar, yen and gold were also sought after. On the other hand, the euro fell by 0.66% against the dollar, to 1.076 dollars for one euro.
“It is clear that after a brief respite at the start of the week, we are far from out of the woods,” warns Fiona Cincotta, analyst at City Index, interviewed by AFP. “As interest rates continue to rise, fears about the banking sector are likely to grow. The central banks of the United States, England, Switzerland and Norway have indeed announced a new increase in their key rates, their main tool in the fight against inflation. This “increases the pressure” on banks, according to CMC Markets analyst Jochen Stanzl.
Oil prices also fall, which is often a sign that investors fear an economic recession. A barrel of North Sea Brent for delivery in May lost 2.61%, to 73.93 dollars, while a barrel of American WTI for the same term fell 2.76%, to 68.03 dollars.
