Global markets remain under pressure. In the wake of the sharp drop in Deutsche Bank, which closed down 8.5% 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 on 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. “With regard to financial stability, the ECB has all the tools necessary to provide liquidity to the euro area financial system, if necessary”she assured.
The German Chancellor, Olaf Scholz, wanted to be reassuring about the state of health of Deutsche Bank, Germany’s leading bank. “Deutsche Bank has fundamentally modernized and revamped its business model and is very profitable. There is no need to worry about anything”he said after the summit.
Wall Street opened lower, with the Dow Jones dropping 0.57%, the Nasdaq 0.54% and the broader S&P 500 index down 0.58% in early trading. The decline in the main European indices has increased since the opening: Paris yielded 2.02%, London 1.43%, Frankfurt 2.03% and Milan 1.88% around 3 p.m.
Bypassing Western Sanctions
The banking sector of the broader Stoxx Europe 600 index fell, for its part, 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 declined 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”
“The fear of contagion” in the banking sector “has not disappeared yet”notes Neil Wilson, an analyst at Finalto, who points to the sharp decline in European bank stocks on Friday, which “weighs on the general feeling” 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. The ten-year German debt rate, which varies inversely to the price of the bond, fell to 2.11% around 3 p.m., against 2.19% at the close on Thursday. Safe havens such as the dollar, the 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.
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“It is clear that after a brief respite at the start of the week, we are far from out of the woodswarns Fiona Cincotta, an 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. That “increase 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 Brent from the North Sea 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.