European stock markets continued their decline today, Monday, recording the worst session of the year, on fears of the spread of the bankruptcy of three US banks to the European banking sector.
Trading in the European stock exchanges began almost stable following the announcement of exceptional measures in the US markets, but then it fell, and the decline reached around 9:50 GMT, 2.33% in Paris and 2.41% in Frankfurt, following losing more than 3%, and 2.01%. % in London, and 4.18% in Milan.
In Asia, the Tokyo Stock Exchange fell 1.11%, but Shanghai rose 1.20% and Hong Kong 1.95%. “We have forgotten how dependent the banking system is on trust,” Lionel Milka of Swan Capital told AFP.
Wall Street opens lower
The main stock indices on Wall Street also opened lower today, Monday, affected by the decline in bank stocks, amid fears of a continuation of crises in the wake of the collapse of the Silicon Valley Bank, while expectations rose to stop raising interest rates in March.
The Dow Jones Industrial Average fell 89.71 points, or 0.28 percent, to open at 31,819.93 points.
The Standard & Poor’s index opened down by 26.47 points, or 0.69 percent, at 3,835.12 points, while the Nasdaq Composite Index lost 97.43 points, or 0.87 percent, to open at 11,041.46 points.
Confidence shake
Confidence in US regional banks appears to be shaky following three bankruptcies in recent days of Silicon Valley Bank, Signature Bank and Silvergate Bank.
“Only the big banks look safe,” the expert continued. The US authorities took several measures over the weekend to try to restore confidence in the US banking system and avoid huge withdrawals of deposits that might further weaken these institutions. Among the measures announced on Sunday was the authorities’ guarantee, in particular, to withdraw all deposits from the bankrupt Silicon Valley bank. The US Federal Reserve (the central bank) has also agreed to lend money to other banks that may need them to meet withdrawal requests from their customers.
“It’s not a federal bailout, but it provides guarantees” to “find buyers quickly,” explains Alexander Paradise, an analyst at IG. Paradis stressed the existence of a “stress phase” in the markets, although the situation, in his opinion, is far from what happened in 2007.
Another negative session for the banks
As was the case on Friday, European banks continued their decline on Monday, especially banks that are considered less solid than others. Credit Suisse lost 9.90%, recording its lowest historical level, while Commerzbank lost 12%, BNP Paribas 5.29%, and Societe Generale 5%. As for HSBC Bank, whose shares fell 3.58%, it announced on Monday morning the purchase of the British branch of Silicon Valley Bank for one pound sterling, allowing customers to “access their deposits and banking services normally.”
Will the Federal Reserve change its monetary policy?
This crisis in the banking sector “changes the data on the Fed’s expectations,” confirms Ipek Ozkardskaya of Swissquote Bank. Sharp rises in interest rates over the past year to curb inflation have contributed to the weakening of banks and the slowdown in economic activity.
Recent events may convince US Federal Reserve officials to slow down at their next meeting on March 21-22.
After the majority of investors were expecting a continuation of the sharp increase in the main interest rates by 0.5 percentage points, it now seems that this option has become remote.
Sovereign bond interest rates fell
Sovereign bond rates fell in the market Monday. The interest rate on the US loan for a period of 10 years was 3.50%, compared to 3.70% on Friday at the close, while the interest rate on German bonds on the same maturity date was 2.21%, compared to 2.50% at the close on Friday. The dollar fell once morest other currencies: The euro rose 0.27% to 1.0672 dollars, and the pound rose 0.45% to 1.2085 dollars at around 09:45 GMT.
Bitcoin rebounded by 2.43% to $22,010 per unit, erasing much of the loss that followed the announcement of Silicon Valley’s difficulties.
