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Monday, March 20, 2023

Tension in global stock markets due to fear of a bank collapse in the US

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The European markets began the day almost in balance after the announcement of exceptional measures but then fell: around 09:50 GMT Paris fell 2.33%, Frankfurt 2.41%, after losing more than 3%, and London 2. 0.01% Madrid lost for its part about 4%, the same as Milan.

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In Asia, the Tokyo Stock Exchange lost 1.11%, but Shanghai gained 1.20% and Hong Kong 1.95%.

“We had forgotten how much the banking system depends on trust,” Lionel Melka, a partner at Swann Capital, told AFP.

Confidence in US regional banks appears to have fallen after three bankruptcies in recent days, including Silicon Valley Bank.

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US authorities took steps over the weekend to try to curb mistrust in the US banking system and avoid massive deposit withdrawals that could further weaken it.

Among the measures announced on Sunday, the authorities will guarantee the withdrawal of all deposits from Silicon Valley Bank (SVB).

The US Federal Reserve (Fed) also pledged to lend the necessary funds to other banks that need them to meet their clients’ demands for withdrawal of funds.

“This is not a federal bailout, but it does offer guarantees” to allow buyers to appear “quickly” for the bankrupt bank, says Alexandre Baradez, an analyst at IG.

After Friday’s falls, European banks returned to the red on Monday, particularly those considered less solid: Credit Suisse lost 9.90% (a new all-time low) and Commerzbank 12%, while BNP Paribas fell 5.29 % and Société Générale 5%.

HSBC, which lost 3.58%, announced on Monday the purchase of the British subsidiary of Silicon Valley Bank for one pound, which will allow customers “to access their deposits and banking services as normal.”

This crisis in the banking sector “is a game changer for the expectations of the Fed,” said Ipek Ozkardeskaya of Swissquote Bank.

Sharp interest rate hikes last year to fight inflation helped weaken banks and slow economic activity. Now the central banks could slow down at their next meeting on March 21-22.

For its part, the interest rate on the 10-year US bond was 3.50%, compared to 3.70 at the close of Friday, while the German rate for the same maturity was trading at 2.21%, compared to 2, 50% of the closing on Friday.

The dollar was down against other currencies, with the euro up 0.27% at $1.0672 and the pound up 0.45% at $1.2085 around 0945 GMT.

Bitcoin rallied 2.43% to $22,010, erasing much of the loss that followed the announcement of SVB’s troubles.

Source: Ambito

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