Stress wins the markets. European stock markets fell sharply on Monday, again won by concerns about the risks of contagion in the global banking sector after bankruptcies in the United States in recent days.
Wall Street stabilized after opening sharply lower and two sessions of sharp decline: around 2 p.m. GMT (3 p.m. in France), the Dow Jones index took 0.25%, the S&P 500 was stable (+ 0.03% ) and the Nasdaq technology index fell 0.17%. The European markets remained clearly in the red, but recovered after having lost more than 3% at the start of the afternoon: Paris and Frankfurt fell by 2.35% and 2.50%. London yielded 1.82% and Milan 3.56%, the largest declines since last summer. In Asia, the Tokyo Stock Exchange lost 1.11% but Shanghai gained 1.20% and Hong Kong 1.95%.
The debt market, perceived as safe haven investments in the event of a crisis, was also experiencing a turbulent session: certain government securities, in particular the short-term debt of the United States, posted historic declines. Oil also suffered the blow, with falls of more than 4%. Confidence in US regional banks appears shattered after three bankruptcies in recent days, including that of Silicon Valley Bank. “Only the big banks seem safe,” he continues.
Measures in the United States
The US authorities took several measures over the weekend to try to stem mistrust in the US banking system and avoid massive withdrawals of deposits that could further weaken these institutions. Among those announced on Sunday, the guarantee of the withdrawal of all the deposits of the bankrupt bank Silicon Valley Bank (SVB).
The US Federal Reserve (Fed) has also agreed to lend the necessary funds to other banks that may need them to honor withdrawal requests from their customers. “Your deposits will be available when you need them,” confirmed Joe Biden on Monday, addressing Americans from the White House. The President of the United States has promised that taxpayers will not be called upon to deal with the turmoil of the moment.
On Friday, European banks fell again on Monday, with an even more marked movement for banks perceived as less solid: Credit Suisse 9.90% hit a new historic low point and Commerzbank fell 12% while BNP Paribas dropped 5.29% and Societe Generale 5%. HSBC, which lost 3.58%, announced on Monday morning to buy the British branch of Silicon Valley Bank for one pound, which allows customers to “access their deposits and their banking services normally”.
Weakened banks
This crisis in the banking sector “changes the game on the expectations of the Fed”, underlines Ipek Ozkardeskaya, of Swissquote Bank. The sharp rises in interest rates over the past year in order to fight inflation have contributed to weakening the banks and slowing down economic activity.
The latest events could convince US central bankers to slow down at their next meeting on March 21-22. While the majority of investors were considering a return to a sharp rise in key rates, of 0.5 percentage point, this option now seems to have been ruled out.
Sovereign rates fell on the bond market on Monday. The interest rate for the US 10-year loan was 3.50%, against 3.70 on Friday at the close, while the German rate at the same maturity was trading at 2.21% against 2.50% on Friday at fence. The dollar fell against other currencies: the euro recovered 0.27% to 1.0672 dollars and the pound 0.45% to 1.2085 dollars around 10:45 a.m. Bitcoin rebounded 2.43% to $22,010, erasing much of the losses that followed SVB’s trouble news.
European authorities remain confident
However, European leaders are reassuring for the time being. This Monday morning, Bruno Le Maire estimated on franceinfo that he saw “no risk of contagion”. “What happened in the United States is very singular, it is a bank which was very exposed to the tech sector, which had difficulties linked to the increase in interest rates”, a analyzed the minister. Same story in Germany, while banking supervisor Bafin assured that the bankruptcy of SVB does not constitute “a threat to financial stability”.
At midday, the European Commissioner for the Economy, Paolo Gentiloni also indicated that there was “no direct contagion”. From Brussels, ahead of a meeting of eurozone finance ministers, he added: “The possibility of an indirect impact is something we need to monitor but at the moment we don’t see a significant risk.”
The descent into hell of the Silicon Valley Bank, which finances many tech players, has sown the markets. In the background, the painful memory of Lehman Brothers, which had precipitated the banks of the whole world in its downfall.