After the excitement, some calm has returned to the European banking sector. However, experts do not want to give the all-clear. The focus is now on an upcoming interest rate decision by the Fed.
After some initial excitement about the European banking sector, interest in safe haven investments such as gold has also waned. On Tuesday, the price for a troy ounce of the precious metal was around 1970 US dollars, below the 2000 dollar mark. On Monday, this threshold was exceeded for the first time in about a year. Other financial assets that are considered safe, such as government bonds, also calmed down on Tuesday.
At the start of the week, government securities with high credit ratings such as federal securities were in high demand at times. The trigger was the not entirely positively received emergency takeover of the major Swiss bank Credit Suisse by competitor UBS. The background to the takeover are numerous problems at Credit Suisse, which threatened to damage confidence in the European banking sector in the current nervous market environment. In addition, there are significant problems at several medium-sized US banks, which are causing unrest beyond the United States.
Experts give no all-clear
Despite the reassurance, experts do not want to give the all-clear. “Nonetheless, the aftermath is to be expected on the markets,” stressed Ulrich Stephan, Postbank’s chief investment strategist. The interest rates at which banks can raise money on the capital market are likely to remain high and reduce the profits of the financial institutions.
Analysts at Landesbank Hessen Thüringen (Helaba) said Monday’s nervous market reactions showed confidence in stability was fragile. They drew attention to the US Federal Reserve’s upcoming interest rate decision on Wednesday. In view of the high inflation, a further interest rate hike is expected. Standing still, on the other hand, could trigger new concerns – “according to the motto: Where there’s smoke, there’s fire,” said Helaba.
Source: Stern
