Sat 25 Mar 2023 9:55 am - Jerusalem Time
Deutsche Bank raises a state of anxiety in the financial markets
Fear returned to grip the financial markets , especially in Europe, where the banking sector continued to decline despite the statements of politicians who tried to reassure investors about the stability of the financial system.
In Europe, the stock exchanges declined by 1.74% in Paris, 1.66% in Frankfurt and 1.26% in London, after recording an improvement at the beginning of the week following the acquisition of Credit Suisse by UBS.
Michael Hewson, analyst at CMC Markets commented, "The uncertainty in the markets has caused the banking sector to lose all of the gains recorded since the beginning of the year within three weeks."
However, the expert could not identify a "clear catalyst" to explain the downward movement during the day "other than uncertainty about the possibility of future interest rate increases and the effects they may have on financial stability" and other sectors of the economy.
Raising interest rates could penalize weaker banks and raise fears of new bankruptcies after those witnessed by Silicon Valley Bank (SVB) in the US, and then two other US banks this month.
"It appears that these concerns have reached a tipping point before the weekend," Hewson said.
The banking sector declined in the broader Stoxx Europe 600 index by 3.53% after a sharp increase in the cost of insurance against default risks (CDS), which raised concerns about the resilience of European banks, led by Deutsche Bank .
With difficulty, the bank's share closed at a loss of 8.53%, settling at 8.54 euros, after losing up to 13% during the day, in the third consecutive session of declines on the Frankfurt Stock Exchange. Its competitor Commerzbank lost 5.45%, down to 8.88 euros.
Many European banks also closed lower. In Paris, Societe Generale shares fell 6.13%, the largest decline in the CAC 40 index, and BNP Paribas lost 5.27%. In London, Standard Chartered fell by 6.42%, Barclays (-4.21%) and NatWest (-3.58%).
- A matter of trust -
These declines occurred despite central banks' move to provide liquidity and efforts to restore confidence in the banking system.
Neither the remarks of Christine Lagarde, President of the European Central Bank, and her reaffirmation of the resilience of the banking system which she said “has a solid position in terms of capital and liquidity,” nor those of German Chancellor Olaf Scholz or French President Emmanuel Macron, were able to calm souls.
The French president stressed that "the eurozone is the region in which banks enjoy the greatest degree of resilience," while the German chancellor stressed that "there is no need for concern" for Deutsche Bank.
In Zurich, Credit Suisse fell by 5.19% and UBS by 3.55%.
Bloomberg said that these banks are among those suspected by the US judiciary of helping wealthy Russians circumvent Western sanctions.
In contact with Agence France-Presse, Credit Suisse refused to comment on these accusations, while UBS did not respond to similar questions directed to it by AFP.
As for the US indices, they moved quietly, with the Dow Jones index and the broader S&P 500 index approaching balance, while the Nasdaq index declined by 0.38% at around 17:00 GMT.
Banks recorded a decline in New York, but to a lesser degree, ranging between 0.19 and 2.69%, before Treasury Secretary Janet Yellen's meeting with financial regulators on Friday, including Federal Reserve Chairman Jerome Powell.
- Demand for dollars and government bonds -
The bond market was once again a haven for investors, and the yield on US government bonds for 10 years was 3.37%, compared to 3.42% the day before the close.
As another safe haven, the dollar rose by 0.68% against the euro to $1,075 per euro.
Oil prices have also fallen, which often indicates that investors fear an economic recession.
A barrel of Brent crude from the North Sea for May delivery lost 1.37%, down to $74.88, while a barrel of West Texas Intermediate crude for the same period declined by 1.10%, settling at $69.19.