Today (17.3.2023) the mood in the foreign stock markets recovered after a week that was a test for the banking sector and now there is a moderate optimism for tomorrow.
After the bailouts offered to several American banks and Credit Suisse, which was considered the weak link in Europe, international stock markets appeared to be recovering.
Eleven major U.S. banks pledged on Thursday to support First Republic, the 14th largest U.S. bank by assets, allaying market fears of another banking collapse after those of Silicon Valley Bank, Signature Bank and Silvergate in the past week.
An effort that was welcomed by the US central bank (Fed), the Treasury Department and two financial regulators, somewhat reassuring investors nervous about the potential risk of contagion to other banking institutions.
Increase in indices in Europe and Asia
In Europe, stock indices rose 0.89% in Frankfurt, 0.72% in Paris, 1.10% in London and 1.50% in Milan around 11:00 Greek time, finding support in the confidence message in banking sector from the European Central Bank (ECB) which yesterday declared it ready to intervene, if necessary, to “preserve financial stability” in eurozone.
In Asia, stock markets also rallied, with Tokyo up 1.2% and Hong Kong up 1.1%.
“Concerns about the banking sector are easing after major banks offered their support to First Republic and the Swiss National Bank (SNB) bailed out Credit Suisse,” commented Eduard Moya, analyst at Oanda.
Signs of easing were also evident in the government bond market which was particularly volatile this week but stabilized after the ECB announced its strategy.
France’s central bank governor Francois Villeroy de Gallo also sought reassurance this morning. “French and European banks are extremely stable,” the French central banker told BFM Business, and “are not in the situation that some American banks are for a very simple reason, that they are not subject to the same rules.”
Since March 10, bank failures on the other side of the Atlantic have brought back the specter of the 2008 financial crisis that destabilized the global economy.
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