It is a bad week that ends from the point of view of holders of equity portfolios. After being rocked by statements by Jerome Powell, the head of the US Federal Reserve (Fed) on the likelihood of a rate hike to an elevated ceiling above 5% this year, which is never a good signal for listed values, here Thursday evening, an American bank specializing in the financing of high-tech companies and start-ups took the plunge. On Friday, the trend in European markets was heavily affected, with the specter of the collapse of Lehman Brothers and the financial world resurfacing…
New financial crisis? We are here in another scenario, less global than in 2008, but the organizations linked to the Silicon Valley Bank and its parent company will no doubt struggle to regain balance. And it is the entire private equity ecosystem (the unlisted) that will suffer for weeks from the mistrust of the market. As proof, on Friday at home, the backlash received by the shares of the holding company Sofina, weighted, as we know, from good participations in private equity. More broadly, listed banks suffered the brunt of the downward movement of managers, even though they had started the year with good progress linked to the prospect of rebuilding their margins in the context of the rise in interest rates. interest.
Interest rates, again
The week ahead is likely to be dominated by rates again, with the European Central Bank (ECB) meeting its monetary policymakers next Thursday with a further 50 basis point hike. (0.50%) of its reference rates. This will not be good news, but it has already been integrated by the operators and no particular movement is expected after this announcement. It is true that at home, while energy prices have returned to tolerable levels, underlying inflation remains a concern. The brakes given by the ECB to the economy of the euro zone through its hikes in short-term rates have not yet produced enough results to stop the movement. In Germany, inflation is holding steady at an annual rate of +8.7% and industrial production, slowed down last year by gas prices, has picked up again. At home, the National Bank is forecasting measured growth of 0.4% for the current quarter.
Lack of reaction
In the United States, too, the lack of effects of the restrictive monetary policy announces a continuation of the monetary firmness of the Fed, but here, the fear which weighed on the New York places at the beginning of the week, is that of see the issuing institute opt for higher increases than the 25 basis points envisaged previously. But the disturbing, firm remarks made by the boss of the Fed in front of the House of Representatives are undoubtedly largely a psychological strategy intended to cool the ardor of businesses and consumers. In practice, the employment figures released on Friday show the beginning of a slowdown, with the unemployment rate dropping from 3.4% in January to 3.6% in February.
The pace of job creations also fell, while remaining high in absolute terms, with 311,000 jobs created in February against 504,000 in January. During the week, the Bank of Canada, which is adapting to an economic context quite similar to that of the United States, opted for a pause in its restrictive monetary tactic, considering that the inflation curve presented a satisfactory outlook in the medium term. . What lead to the Fed not to disturb the operators by a tightening more marked than expected?
Bank suspects
On the stock market, the key event remains the slide of the banks, even those with no apparent link with the Silicon Valley Bank (SVB) – which is now looking for a buyer after a “bank run” of anthology. In the United States, we saw falls of 22% for First Republic Bank, 20.1% for Signature Bank, 16% for Zions Bancorp, 14.1% for Charles Schwab, and even 9.3% for JPMorgan. In Europe, we note the negative spreads of Barclays (-8.6%), Deutsche Bank (-8.5%) and ING (-7.1%), among the most significant.
But we are far from a liquidity crisis scenario. SVB, in passing, offloaded more than 20 billion dollars of bonds, cashing a loss in passing, but the consideration was there. We should also remember here the weakness of real estate faced with the context of high interest rates, but in a less significant way than elsewhere where debt is less supervised than for our RRECs (regulated real estate companies).