(Paris) Financial markets regained confidence on Friday after a trying week for the banking sector, immediately relieved by the bailout provided to several American banks and Credit Suisse, considered a weak link in Europe.
Eleven major U.S. banks pledged Thursday to bail out First Republic, the 14th-largest U.S. bank by asset size, allaying market fears of yet another bank failure after Silicon Valley Bank, Signature Bank and Silvergate last week.
An effort hailed by the US Federal Reserve (Fed), the Treasury and two financial regulators, and which had something to reassure investors terrified by a possible risk of contagion to other banking establishments.
In Europe, stock indices rose 0.89% in Frankfurt, 0.72% in Paris, 1.10% in London and 1.50% in Milan around 5 a.m. (Eastern time) supported by a message of confidence in the banking sector from the European Central Bank (ECB), which on Thursday said it was ready to intervene if necessary to “preserve financial stability” in the euro zone.
In Asia, the stock markets recovered from the emotions of the previous day, recovering by 1.2% in Tokyo and 1.1% in Hong Kong.
“Concerns over the banking sector are fading after big banks gave support to First Republic and SNB extended a lifeline to Credit Suisse,” said Edward Moya, analyst at Oanda.
Signs of appeasement were also confirmed in the government bond market, which was extremely volatile this week, but which has been stabilizing since the announcement of the ECB’s strategy.
The Governor of the Banque de France François Villeroy de Galhau wanted to be reassuring on Friday morning.
“French and European banks are extremely solid,” he said on BFM Business, and “are not in the situation of some American banks for a very simple reason which is that they are not subject to the same rules. “.
Since March 10, these bank failures across the Atlantic have raised the specter of the 2008 financial crisis that destabilized the global economy.
In a sign of financial stress, US banks have since borrowed a total of $164.8 billion from two US Federal Reserve guarantee facilities in recent days, according to financial news agency Bloomberg.
As a vector of risk in Europe, Credit Suisse was also fighting for its future.
After having suffered the worst session in its history on the stock market on Wednesday, bearing the brunt of worries about the banking system, the group in difficulty received support from the Swiss central bank to strengthen its liquidity.
But the action Credit Suisse, which had recovered 19.15%, without compensating for the fall of almost 25% on Wednesday, went back into the red (-3.54% around 9:230 GMT) after the hypothesis of a takeover of the banking giant has resurfaced according to analysts.
All of this banking turmoil has fueled speculation that central banks might ease their stance on inflation in order to avoid a severe recession.
On Thursday, however, the European Central Bank reaffirmed its determination to combat persistently high inflation by raising its key interest rates by an additional 0.5 percentage points, but refraining from deciding on further monetary tightening and relying on future data to determine the future path of rates.
“The ECB leaves all its options open ahead of Fed and Central Bank of England decisions next week,” comments Axel Botte, international strategist at Ostrum AM.
Investors will therefore closely monitor the next economic indicators in order to get an idea of the timing of future monetary tightening by the Fed.
The OECD is due to publish its global growth forecasts for the next two years during the day.