Renewed stress on banks sends global markets tumbling again

(Paris) The banking sector remains under pressure on Friday, causing global markets to falter, despite the assurances of several politicians on the stability of the financial system.

Wall Street was trading lower, with the Dow Jones dropping 0.77%, the NASDAQ 0.88% and the Broader S Index

In Europe, the places fell more: Paris and Frankfurt lost 2.02%, London 1.64% and Milan 1.91% around 11:15 a.m. (Eastern time).

The banking sector of the broader Stoxx Europe 600 index fell back around 4%, after a sharp increase in the cost of default risk insurance (CDS) of several European banks, led by Deutsche Bank.

The statements of Christine Lagarde, President of the European Central Bank, reaffirming the resilience of the banking system which “has solid positions in terms of capital and liquidity”, and those reassuring of Olaf Scholz or Emmanuel Macron, have not had only a limited effect on feverish markets since the bankruptcy of the American bank SVB and the takeover by UBS of Credit Suisse.

“The euro zone is the zone where the banks are the strongest”, affirmed the French president, while the German chancellor judged that there is “no need to worry” for Deutsche Bank.

The first German bank was among the most battered banks on the stock market, with a fall of 11.03%, after having sunk more than 13%. Commerzbank lost 5.62% in Frankfurt.

In Paris, Societe Generale shares fell 6.57%, the largest drop in the CAC 40 index, BNP Paribas also lost 5.74%. In London, Barclays lost 5.31% and HSBC 3.14%. Banco Sabadell fell by 4.51% in Madrid, ING by 4.21% in Amsterdam and Nordea by 7.86% in Copenhagen.

In Zurich, Credit Suisse fell by 6.49% and UBS by 5.70%, picking up some colors. According to Bloomberg, these banks are among those suspected by American justice of having helped Russian oligarchs to circumvent Western sanctions. Contacted by AFP, Credit Suisse declined to comment on the information and UBS did not respond.

In New York, the sector was also neglected, but to a lesser extent: JP Morgan Chase lost 1.88%, Morgan Stanley 4.02%, Goldman Sachs 2.11% and Bank of America 1.58%. The regional bank First Republic, particularly under pressure since the bankruptcy of SVB, dropped 2.87%.

US Treasury Secretary Janet Yellen will bring together the country’s financial regulators on Friday, including Federal Reserve (Fed) Chairman Jerome Powell.

“Fear of contagion” in the banking sector “hasn’t gone away yet,” notes Finalto analyst Neil Wilson, pointing to the sharp decline in European bank stocks on Friday, which is “weighing on overall sentiment.” of the market.

“As I’ve said many times over the past two weeks, the crisis will only end when investors stop wondering who’s next.” “And it looks like we’re not there yet. »

A sign of investor nervousness, European government bonds, assets considered low risk, were highly prized. The rate on Germany’s 10-year debt, which moves inversely to the price of the bond, fell to 2.11% around 11 a.m. EST, down from 2.19% at Thursday’s close.

Safe havens such as the dollar, yen and gold were also sought after. On the other hand, the euro fell by 0.75% against the dollar, to 1.075 dollars for one euro.

“It is clear that after a brief respite at the start of the week, we are far from out of the woods,” warned Fiona Cincotta, an analyst at City Index, interviewed by AFP. “As interest rates continue to rise, fears about the banking sector are likely to grow.”

The central banks of the United States, England, Switzerland and Norway have indeed announced a new increase in their key rates, their main tool in the fight against inflation. This “increases the pressure” on banks, according to CMC Markets analyst Jochen Stanzl.

Oil prices also fall, which is often a sign that investors fear an economic recession. The barrel of Brent from the North Sea for delivery in May lost 2.18% to 74.25 dollars, while the barrel of American WTI at the same maturity fell by 2.27% to 68.37 dollars.