European stock markets widen their losses, Wall Street opens lower


UPDATE ON SITUATION – Fears resume this Friday on the financial health of European banks, whose prices are down sharply.

The New York Stock Exchange opened lower on Friday, again upset by the earthquake which shook the Western banking sector, with Deutsche Bank this time in the line of sight, investors favoring the safest assets. Around 1:40 p.m. GMT, the Dow Jones dropped 0.58%, the Nasdaq index returned 0.66% and the broader S&P 500 index lost 0.60%.

For their part, the European stock markets are experiencing sharp declines on Friday with the return of fears about the financial health of European banks, which are suffering heavy losses on the markets. The decline in the main indices has increased since the opening: Paris lost 2.15%, London 1.87%, Frankfurt 2.15%, Milan 2.46% around 10:40 GMT. The banking sector of the broader Stoxx Europe 600 index for its part fell by 4.7%, after a sharp increase in the cost of insurance against the risk of default (CDS) of several European banks.

European banks in large decline, Deutsche Bank loses more than 10%

Deutsche Bank is among the most affected with a fall of 12.43% at 12:47 p.m. Commerzbank also lost 8.99% in Frankfurt. Deutsche Bank’s debt hedging tool now points to a probability of default for Germany’s biggest bank of 27.4% within the next five years. This probability is 19.3% for Commerzbank, according to Bloomberg. The cost of debt default insurance has increased for most European banks but less than for Deutsche Bank. For Barclays and Société Générale the probability is around 13%, according to these tools.

In Paris, the Societe Generale share yielded 7.46%, the largest drop in the CAC 40 index, BNP Paribas also lost 6.40%. Barclays lost 5.94% in London and HSBC 4.01%. ING fell by 4.68% in Amsterdam and Nordea by 8.7% in Copenhagen. In Zurich, Credit Suisse fell by 7.24% and UBS by 6.79%. According to the financial information agency Bloomberg, they are the subject of an investigation by American justice and suspected of having helped Russian oligarchs to circumvent Western sanctions. Contacted by AFP, Credit Suisse declined to comment on the information and UBS did not respond.

On the other side of the Atlantic, the scapegoats of this banking crisis are targeted, first and foremost the regional establishment First Republic (-5.27%). The San Francisco bank has lost almost 90% of its market capitalization in just over two weeks. The resurgence of tension also affects the Californian PacWest (-2.49%), but also the big American banks like Goldman Sachs (-2.01%) or Morgan Stanley (-2.55%).

Leaders try to reassure

The President of the European Central Bank (ECB) Christine Lagarde reaffirmed Friday the solidity of the banking system of the euro zone with the leaders of the EU meeting in summit. “The euro area banking sector is resilient as it has strong capital and liquidity positions“, she said.

German Chancellor Olaf Scholz wanted to be reassuring about the state of health of Deutsche Bank. “Deutsche Bank has fundamentally modernized and revamped its business model and is very profitable. There’s nothing to worry about“, he explained at the end of the summit. “The banking system is stable in Europe“, he hammered. For his part, French President Emmanuel Macron said that “the fundamentals of European banks are solid (…) The euro zone is the zone where the banks are the most solid“.

Nervous investors?

A sign of investor nervousness, European government bonds, assets considered low risk, are very popular. The ten-year German debt rate, which varies inversely to the price of the bond, fell to 2.02% around 10:30 GMT, against 2.19% at the close on Thursday.

Wall Street ended in the green on Thursday, reassured by the idea that the US Federal Reserve could soon stop its rate hikes and by a statement from Treasury Secretary Janet Yellen who assured that the authorities would be “ready to take additional measures if necessaryto avoid contagion in the financial sector. In Asia, Hong Kong lost 0.67% and Shanghai 0.64%. Tokyo lost 0.13%, penalized by the rise in the yen. Inflation in Japan slowed for the first time in over a year in February to 3.1%.

The euro plunges 1% against the dollar

Good news however in the euro zone, the economic growth of the private sector in the euro zone accelerated in March to reach its highest level for ten months, according to an index published by S&P Global. Its level is higher than analysts’ forecasts, which could encourage the European Central Bank to further increase its key rates in the months to come.

Oil prices were also falling, often a sign that investors fear an economic recession. The barrel of Brent from the North Sea for delivery in May lost 3.28% to 73.44 dollars, while the barrel of American WTI at the same maturity fell by 3.42% to 67.58 dollars around 10:30 GMT. The euro fell against several currencies, the single European currency falling 0.94% against the dollar to 1.0729 dollars for one euro.




Source link -93