(CercleFinance.com) – After a double test of 7,170 intraday, the CAC40 is trying to save the support at 7,230: the decline is reduced from -2% to -1.55% (around 7,200) but the company is turns out to be complicated.
Wall Street could help as the Dow Jones came out of red (+0.1%) and the S&P500 (-0.3%) erased half of its losses in 1 hour.
But the nervousness remains palpable with fears of default by two American banks (one of which -SVB.Financial- is renouncing to recapitalize, and the other -Silvergate- specializing in cryptos would throw in the towel).
Investors’ doubts about the health of the US financial system and the sustainability of current debt levels are now resurfacing.
Silicon Valley Bank (SVB) has just announced that it has failed to launch a capital increase in order to bail itself out after suffering heavy losses on the sale of part of its bond portfolio ($1.8 billion) in an attempt to free up cash.
The title of this 40-year-old company, which helps finance Californian technology companies, fell more than 60% last night at the close of Wall Street … and remains suspended this Friday (when it can no longer do dealing with withdrawals and returning their money to customers, which is the very definition of bankruptcy).
It drags in its wake First Republic Bank (-50%) and Signature Bank (-31%) which could in turn face significant withdrawals (‘bankrun’).
The ‘regional banks’ sector ETF in the United States experienced its worst week since autumn 2008, with a weekly decline of almost -10%.
Still in the banking sector, Silvergate Capital, an institution very focused on cryptocurrencies, continued its fall (-42%) yesterday after having expressed its intention to go into liquidation soon.
These announcements caused the American stock markets to fall on Thursday, fearing a domino effect of the crisis on the model of the sequences which had precipitated the financial crisis of 2008.
It is mainly financial stocks that have been attacked over the past 48 hours, with investors seeking to reduce their positions vis-à-vis the sectors most sensitive to current uncertainties.
The Bank of America share thus lost more than 6% (-3% today), Citigroup around 4% and Morgan Stanley not far from 3%.
These fears logically led to a rush towards less risky assets, such as gold (+2.7% to $1,864) or government bonds.
Rates are also easing spectacularly as experts anticipate action by the FED on interbank to avoid a freeze (in a climate of mutual suspicion), which would add liquidity.
Our OATs erased -17.5Pts at 2.965%, Bunds -18Pts at 2.461% and Italian BTPs -11Pts at 4.28%.
Across the Atlantic, the relaxation is even more spectacular: the yield of the ’10 years’ falls by -22Pts to 3.00%, the yield of the ’30 years’ also falls below 3.705%, the yield of the ‘2 years’ erases -25Pts at 4.65%.
The highly anticipated ‘NFP’ published at 2:30 p.m. is more of a non-event.
The US economy has allowed the creation of 311,000 jobs: this marks a marked slowdown after the sharp increase in January (517,000 jobs created), but it is 45% more than the 215,000 new jobs expected.
Wall Street is trying to reassure itself with an unemployment rate at 3.6% as well as with the stabilization of wage growth (+0.2%).
Barclays economists were therefore right to issue a serious warning yesterday.
‘We believe that solid figures of around 200,000 job creations would be sufficient to lead to a rate hike of 50 basis points at the end of the next FOMC’, had warned the teams of the British bank.
But for the time being, the ‘SVB’ affair is mobilizing all the attention and the big question is whether it is an isolated incident, or the tip of the iceberg of a more systemic problem, given the climate of general over-indebtedness and the bursting of the housing bubble.
Note that the Dollar is being shaken hard, with a brutal loss of -1% towards 1.0690/E, which would end the week at its lowest (and even at its lowest since February 20).
Within the CAC40 and SBF-120, banks are suffering with Sté Générale -5%, BNP-Paribas -4% and Crédit Agricole -3.5%, not to mention Scor with -5.5%.
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