Western stock markets down, still not reassured after a dark week

Three brutal falls, interspersed with two meager rebounds: despite the measures of the Swiss and American authorities, the banking sector concluded a dark week with a new plunge on Friday, beating down all the markets.

Concerns focus primarily on Credit Suisse in Europe, which fell more than 8% on Friday, and on First Republic in the United States, which dropped 33.00%.

Over the week, their stock market valuation fell by more than 25% and 80% respectively.

More generally, the index of European banks fell 2.85% on Friday, widening its losses to 11.47% over the week, the strongest in six months. Weekly losses were even more notable for Societe Generale (-16.94%), Commerzbank (-19.53%), ING (-14.76%), Standard Chartered (-14.30%) and Unicredit (- 14.31%).

US banks continued to suffer, particularly regional and mid-sized brands, as investors wondered “who will be next to need help,” according to Oanda analyst Craig Erlam.

“The value of a bank is the trust we have in it and we need to restore it,” explains Vincent Juvyns, member of the global strategy team at JP Morgan AM.

The trend swept the European stock market indices, which had nevertheless attempted a rebound at the opening: Paris fell by 1.43%, Frankfurt by 1.33%, Milan by 1.64%, London by 1.01%.

On Wall Street, the Dow Jones contracted 1.19%, the Nasdaq index lost 0.74% and the broader S&P 500 index fell 1.10%.

– Feverishness everywhere –

The measures taken so far, such as the 30 billion dollars in deposits of eleven major American banks within First Republic, or those of the central banks earlier in the week, have only managed to restore calm for a few hours.

Investors remain frightened by a possible contagion to other establishments, after the flash bankruptcy of Silicon Valley Bank (SVB) last week. Its parent company, SVB Financial, announced on Friday that it had filed for bankruptcy.

The OECD’s chief economist dismissed any “systemic crisis” to ward off the specter of the 2008 financial crisis. The institution raised its growth forecasts for 2023 and 2024.

“Drawing parallels between the banking sector and banks in particular, with previous crises seems to us unjustified”, also believe RBC analysts.

But the great excitement of investors could be read everywhere: the government bond market experienced the highest volatility since 2008, with a sharp drop in yields.

Gold was trading at its highest level since April 2022, at $1,983 an ounce, while the price of a barrel of oil of the West Texas Intermediate (WTI) variety, the American benchmark, dropped nearly 13% over the week, to move to its lowest level for fifteen months.

– Bitcoin floats –

A sign of financial tensions, American banks have borrowed $164.8 billion from the American central bank (Fed) in recent days.

Credit Suisse also received support from the Swiss central bank (SNB) to strengthen its liquidity. The hypothesis of a takeover has resurfaced, according to analysts, but its Swiss rival UBS refuses for the time being to take part, according to Bloomberg.

The European Central Bank (ECB) was to bring together its supervisory body for banks in the euro zone on Friday for an “exchange of views” on the sector, AFP learned. This is the second time that this body has been convened this week, outside the usual calendar.

All of this turmoil fueled speculation that central banks might ease stances on inflation in order to avoid a severe recession.

However, the ECB reaffirmed its determination on Thursday by raising its key interest rates by an additional 0.5 percentage point. Investors are now awaiting the Fed’s decision, scheduled for Wednesday.

Winner of the week, bitcoin jumped 32% and briefly exceeded $27,000, carried by the hypothesis of monetary easing.

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