European stock markets drop, Wall Street overcomes fear of banking shock

European stock markets ended down sharply on Monday, not reassured by the current banking shock in the United States, apprehension overcome by Wall Street thanks to giant capitalizations and lower bond rates.

European markets have picked up a few colors since their lows at the start of the afternoon, but nevertheless ended down sharply.

The CAC 40 lost 2.90% in Paris, the Dax in Frankfurt 3.04% to end below 15,000 points and the FTSE 100 in London dropped 2.58%, while the Milan Stock Exchange ended down 4 .03%.

On Wall Street, the Dow Jones fell 0.28%, the Nasdaq index gained 0.45% and the broader S&P 500 index fell 0.15%.

Wall Street had opened in the red, like the European markets, frightened by the crisis which has hit the American banking sector for several days, to the point of pushing the American authorities to guarantee, in fact, all of the deposits of American customers, Sunday .

But the indices quickly recovered, to end up around equilibrium, in part thanks to “interest rate-sensitive sectors, which rose thanks to the fall in bond yields”, explained, in a note, Edward Moya. , from Oanda.

The yield on 2-year government bonds thus contracted by almost 0.6 percentage point, to 3.99% against 4.58% on Friday at the close. Over three days, it has just experienced its biggest drop since the famous Black Monday of October 19, 1987.

Operators have completely revised their projections in terms of monetary policy and now see the Fed (American central bank) curb and then lower its rates by the end of the year, while they still counted on Friday on a continuation of the tightening by forced march.

This outlook and the sharp drop in bond yields have benefited some companies in the technology sector, which are heavily dependent on borrowing conditions to finance their sustained growth.

The New York market has also been able to count on “mega caps”, giant capitalizations, many of which come from the technology sector. “They have solid balance sheets and do not present any immediate risk,” commented Patrick O’Hare of Briefing.com.

Apple (+1.33%), Microsoft (+2.14%) and Amazon (+1.87%), which weigh more than 4,000 billion dollars in total, pulled the odds, on their own.

Despite Wall Street’s behavior, “concern remains about regional banks,” said Nick Reece of Guinness Global Investors.

“Some fear new bankruptcies, to see the value of the actions (of these banks) destroyed and say that it is not a risk that they want to take”, continued the manager.

On the front line, the Californian establishment First Republic, cut by 61.83% on Monday’s session alone.

Despite its status as a regional bank, First Republic is nevertheless the 14th largest financial institution in the United States and weighs more than 212 billion dollars in assets.

She was not the only one in the sights of investors. Other regional brands suffered, notably Western Alliance (-47.06%), the Cleveland bank KeyCorp (-24.36%) or the Texas establishment Comerica Bank (-27.67%).

Bright red for European banks

On Friday, European banking stocks fell again on Monday, with an even more marked movement for banks perceived as less solid: the German Commerzbank unscrewed by 12.71%, while Credit Suisse dropped 9.58% . The French BNP Paribas and Société Générale fell by 6.80% and 6.23% and the Italian Unicredit by 8.49%.

In London, the banking giant HSBC, which bought the British branch of Silicon Valley Bank (SVB) on Monday for a symbolic pound, lost 4.13% to 568.10 pence. Standard Chartered (-6.89% to 688.80 pence) and Barclays (-6.31% to 147.48 pence) also suffered.

American labs pulled by Pfizer

The pharmaceutical sector, considered less sensitive to the economic situation, was on a roll, driven by the announcement of the takeover of the biotech Seagen (+14.51%), specializing in cancer treatments, by the giant Pfizer (+ 1.19%), for 43 billion dollars.

Biotech Amgen (+2.33%) was sought, as were Moderna (+6.95%) or Eli Lilly (+3.01%) laboratories.

Falling dollar

The dollar fell against other currencies, undermined by anticipation of a brake from the Fed, the euro resumed 0.80% to 1.0729 dollars and the pound 1.21% to 1.2176 dollars.

Bitcoin soared 15% to $24,229 on hopes of looser monetary conditions and a weaker dollar.