The control room of Euronext, the company that manages the Paris Stock Exchange (AFP/Archives/ERIC PIERMONT)
The Paris Stock Exchange suffered a new dropout on Wednesday, the turbulence in the banking sector, accentuated by the tumble of the action Credit Suisse, having caused a sharp rise in risk aversion.
Erasing its jump from the day before, the CAC 40 star index fell 3.58% to 6,885.71 points, signing its worst session since March 2022.
Concerns about the situation of banks on Wednesday focused on the difficulties of Credit Suisse, after its largest shareholder, Saudi National Bank, ruled out any capital increase in the ailing bank.
“The fears have increased over Credit Suisse, one of the 30 systemic banks”, which are likely to cause a chain reaction of effects on the entire banking system, comments Jeanne Asseraf-Bitton, head of research and of BFT IM’s strategy.
This situation translates into “very strong risk aversion” and “a huge decline in safe havens” such as government bonds, underlines Ms. Asseraf-Bitton, interviewed by AFP.
On the sovereign debt market, all rates have fallen, illustrating the fact that investors expect central banks to adopt more flexible communication in their monetary normalization in the coming days than at their previous meetings.
The yield on the French two-year bond fell sharply by 53 basis points to 2.52% and its German counterpart by 48 basis points to 2.39% around 5:30 p.m. GMT.
The wave of stress at the banking level is one of the consequences of the tightening of the monetary policy of the central banks insofar as the more the rates go up the more it lowers the value of the bonds which are in the balance sheets of the banks.
“It will be a real challenge tomorrow for the European Central Bank”, which must “evaluate the consequences of what happened in the United States and the risks caused by Credit Suisse”, underlines Ms. Asseraf-Bitton.
The ECB “might want to appease the market” by being more flexible than in previous meetings “but it’s a double-edged sword” since inflation persists and “by taking a break, it can raise fears about the state of the financial system. However, she continues, “it should not mean that there is an urgency either” with regard to financial stability.
Panic on bank stocks
The banking sector was hit hard by investor mistrust of the soundness of the banking system, which was sorely tested by the bankruptcy of Silicon Valley Bank (SVB) and the difficulties of Credit Suisse.
Recording the largest drop in the CAC 40 index, Societe Generale plunged 12.18% to 21.50 euros, while BNP Paribas lost 10.11% to 52.03 euros.
The railway manufacturer Alstom tumbled 10.45% to 23.23 euros, the second largest drop in the CAC 40.
Defensive stocks Sanofi (+0.89%) and Orange (+0.60%) were the only ones to keep their heads above water.
© 2023 AFP
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