Three brutal slumps interspersed with two meager recoveries: Despite the measures taken by the Swiss and American authorities, the banking sector closed a dark week with another slump on Friday, crushing all markets.
• Also read: Credit Suisse is going back to the stock market, but investors remain vigilant
• Also read: Markets faltered and banks stormed after bankruptcies in the United States
• Also read: Bankruptcy of Silicon Valley Bank in the United States
Concerns are mostly centered on Europe’s Credit Suisse, which fell more than 8% on Friday, and the United States’ First Republic, which fell 26.5%. Over the week, their market valuation fell more than 25% and almost 70%, respectively.
More broadly, the European Banks Index fell 2.85% on Friday, extending losses over the week to 11.47%, the sharpest in six months. The weekly losses were even more pronounced for Societe Generale (-16.94%), Commerzbank (-19.53%), ING (-14.76%), Standard Chartered (-14.30%) and Unicredit (-14. 31%).
Oanda analyst Craig Erlam said US banks were on track for a second fall averaging more than 10% over the week, particularly regional and mid-cap brands, as investors wondered “who will need help next.” .
“The value of a bank is the trust we place in it and we need to restore that,” said Vincent Juvyns, member of the global strategy team at JP Morgan AM.
The trend swept European indices, which had nonetheless attempted to recover at the open: Paris down 1.43%, Frankfurt 1.33%, Milan 1.64%, London 1.01%.
Wall Street also fell, also suffering from a stronger-than-expected decline in US consumer confidence, which is still at historically low levels. At around 12:50 p.m., the Dow Jones was down 1.07%, the S&P Index was down 1.01% and the Nasdaq was down 0.80%.
The measures taken so far, such as the $30 billion deposit by 11 major American banks within the First Republic or by central banks earlier this week, have only brought calm for a few hours.
After the lightning insolvency of the Silicon Valley Bank (SVB) last week, investors are still afraid of a possible contagion of other institutions. Parent company SVB Financial announced on Friday that it had filed for bankruptcy.
The OECD’s chief economist dismissed any “systemic crisis” to stave off the specter of the 2008 financial crisis, and the institution raised its growth forecasts for 2023 and 2024.
“Drawing parallels between the banking sector and the banks in particular and previous crises does not seem justified to us,” agree RBC analysts.
But investors’ great nervousness could be seen everywhere: the government bond market experienced the highest volatility since 2008 with a sharp drop in yields.
Gold traded at $1,960 an ounce, its highest since April 2022, while oil prices fell around 12% over the week, falling to their lowest in fifteen months.
According to financial news agency Bloomberg, US banks have borrowed $164.8 billion from the US Federal Reserve in recent days in a sign of financial strain.
Credit Suisse has also received support from the Swiss central bank to bolster its liquidity. The hypothesis of a takeover has resurfaced, according to analysts, but Swiss rival UBS is refusing to get involved for the time being, according to Bloomberg.
The European Central Bank (ECB) on Friday wanted to bring together its regulator of banks in the euro zone for an “exchange of views” on the sector, AFP learned. This is the second time this panel has convened outside of the usual calendar this week.
All of this turmoil has fueled speculation that central banks may ease their stance on inflation to avoid a deep recession.
However, the ECB reiterated its resolve on Thursday by raising interest rates by a further 0.5 percentage point. Investors are now awaiting the Fed’s scheduled decision on Wednesday.
The week’s winner, Bitcoin, jumped 23% to above $26,400 on speculation of monetary easing.