by Laetitia Volga
PARIS (Reuters) – European stock markets ended lower, led by financial stocks, as the difficulties of the American bank SVB raised concerns for the entire sector in the face of rising central bank interest rates.
In Paris, the CAC 40 lost 1.3% to 7,220.67 points. The UK Footsie fell 1.67% and the German Dax 1.31%.
The EuroStoxx 50 index fell 1.32%, the FTSEurofirst 300 fell 1.5% and the Stoxx 600 1.35%, the lowest since early February.
At the time of the close in Europe, the New York Stock Exchange had gone back into the green in a very volatile session: the Dow Jones indices took 0.4% while the Standard & Poor’s 500 gained 0.3% and the Nasdaq Composite 0 .15%.
While Wall Street was trying to rebound, European equities suffered a slump in reaction to the rout of SVB Financial Group. According to several sources, the American bank would not have managed to raise capital intended to strengthen its capital, after the losses caused by the sale of a large bond portfolio.
The rise in interest rates has in fact reduced the value of the securities acquired before the issuing institutions started their monetary tightening last year.
“There is a growing crisis of confidence in the financial community, with the concern that SVB would only be the tip of the iceberg and that other banks may face unforeseen financial challenges,” said Sam Stovall , chief strategist at CFRA Research.
And the increase in rates is set to continue, both for the Federal Reserve (March 22) and for the European Central Bank (next Thursday). If a rate hike of 50 basis points for the ECB is no longer debated, the markets are wondering what the Fed will decide.
The monthly jobs report released by the Labor Department did not allow investors to position themselves between a half-point or quarter-point hike.
“Even though job creations were higher than expected, underlying inflation indicators were more subdued,” said Sam Stovall. Tuesday’s US inflation release will be key in the Fed’s decision-making, he added.
VALUES
In Europe, the banking sector fell 3.78%, its biggest drop since June. Unicredit, HSBC, Societe Generale and Deutsche Bank lost from 3.12% to 7.35%.
Among the other movements of the day, Casino dropped 5.64% after the confirmation by the national financial prosecutor’s office of a preliminary investigation of the heads in particular of manipulation of prices in an organized gang and insider trading committed during 2018 and 2019.
RATES/EXCHANGES
The decline in equities boosted investor interest in government bonds, traditional safe haven assets: the ten-year German Bund yield ended the session below 2.5%. Its American equivalent, at 3.7582%, fell 18 basis points, the lowest since mid-February.
In the foreign exchange market, the dollar is affected by the easing of inflationary pressures suggested by the employment report. At the prospect that the Fed sticks to rate hikes of “only” a quarter point, the note fell by 0.89% against a basket of international currencies (-0.06%).
The euro took the opportunity to rise to 1.0654 dollars.
OIL
The oil market is regaining ground but is still heading for another weekly loss amid concerns over the impact of high interest rates on demand for crude.
Brent rose 1.21% to 82.58 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.11% to 76.56 dollars.
(Laetitia Volga, edited by Jean-Stéphane Brosse)
Copyright © 2023 Thomson Reuters