Equity markets fell back on Wednesday as fears surrounding the banking sector and particularly Credit Suisse returned, after the first Saudi shareholder ruled out bailout of the troubled bank
The lull from the previous day didn’t last: Paris fell 2.97%, London 2.76%, Frankfurt 2.43% and Milan 4.01% in the morning session. The index of the European banking sector (Stoxx 600 Banks) collapsed by more than 7%.
US markets fell in early trade, with the Dow Jones returning 1.40%, the Nasdaq index falling 1.01% and the broader S&P 500 index falling 1.39%.
Oil at its lowest level since December 2021, sharply falling prices, rising dollar, wave of volatility: there were signs of great nervousness among investors on all markets.
Equities had held up particularly well over the past four months as central banks hiked interest rates to curb high and stubborn inflation, but uncertainty set in last week following a series of US bank failures.
Credit Suisse shares’ fall to an all-time low from 30.13% in the morning drove the point home on Wednesday after the Swiss group’s main shareholder, the Saudi National Bank, ruled out investing more to prop up the ailing bank .
In a domino effect, European banking stocks plummeted: BNP Paribas fell 10.92%, Société Générale 12.97%, Banco Sabadell 11.19%, ING 9.50%, Commerzbank 9.90%, Deutsche Bank down 8.65%, Unicredit by 7.14%. Almost all of these banks have lost more than 10% of their market value since the beginning of the week, with some more than 15%.
The measures taken by the American authorities and the assurances given by European governments about the soundness of the banking system following the insolvency of the Silicon Valley Bank (SVB) were able to stabilize the markets somewhat on Tuesday. But “fears about the strength of the sector” linger and “the shadow of SVB’s collapse still lingers,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
In an interview with AFP on Wednesday, Joseph Stiglitz, winner of the Nobel Prize in Economics, did not rule out further failures.
Signs that investors are fleeing to investments that are perceived as safer, government borrowing rates have plummeted. The 10-year US bond fell to 3.42% from 3.69% the previous day. The 2-year rate, which has risen significantly since the end of 2021, has returned to below 4% (to 3.79% at around 13:50 GMT).
Bond yields have fallen dramatically since late last week as investors believed the bank shock would prompt central banks to be more cautious about raising interest rates.
The fall in retail sales in the United States in February, a sign of weaker consumption, also points to a slowdown in next week’s Federal Reserve rate hike, as well as a month-long decline in wholesale prices.
Looking ahead to the European Central Bank meeting, “words of reassurance on the state of European banks and implicit support for the banking system where needed would be welcome [faire passer] The ‘pill of 50 basis points’ rise expected Thursday, observes Axel Botte, international strategist at Ostrum AM.
The barrel of WTI slipped below $70 to its lowest level since December 2021. As of 13:35 GMT it was worth $68.17 (-4.40%), down more than 14% since Monday. A barrel of Brent from the North Sea cost $74.70 (-3.55%) and is down almost 13% since Monday.
The dollar used its safe haven status to rise against other currencies. The euro fell 1.78% to $1.0541 and the pound fell 0.69% to $1.2074 around 13:38 GMT.
Bitcoin is up 1.49% to $25,004 and gold is up 0.85% to $1,920 an ounce.