The main stock markets in Europe and North America ended the week under pressure, as concerns persisted about the financial health of the banking system across the Atlantic.
In Europe, the indices of the main stock exchanges of London, Paris and Frankfurt closed down 1.2% to 1.7%.
After the turmoil caused by the recent disaster takeover of Credit Suisse by its rival UBS, also established in Switzerland, it was the turn on Friday of the first bank in Germany, Deutsche Bank, to be in the crosshairs of worried investors. .
Its shares closed down 8.5% on the Frankfurt Stock Exchange, but not without having plunged as much as 14% earlier in the day.
Shares of Germany’s second-largest bank, Commerzbank, also fell 5.4%, as did shares of many major banks in Europe’s other major economies.
Meanwhile, in North America, continued financial concerns over the banking sector in Europe also kept equity investors on the sidelines.
“Financial markets continue to struggle with this surge of uncertainty within the banking sector. Day to day, it looks worse on Friday with what is happening at Deutsche Bank and European banks,” Craig Basinger, chief market strategist at Toronto-based firm Purpose Investments, told Reuters.
On the US stock market on Friday, after being down almost 1% at midday, the main indices such as the Dow Jones, the S&P 500 and the NASDAQ ended up slightly from 0.3% to 0.5 %.
In Canada, where the banking and financial services sector is very influential on the stock market, the S&P/TSX market index ended up slightly up 0.2%. However, it was a late rally after falling 1% in the first half of the session.
“Despite the resurgence of bank contagion risk and the hike in key rates by four major central banks, equities rose slightly this week, thanks once again to growth stocks whose strength cushioned the weakness in value stocks” , noted Martin Roberge, analyst of North American markets at Canaccord Genuity in Montreal, in a note to investors at the end of the session on Friday.
“Still, investors’ higher risk aversion can still be seen in the weakening of value spreads in the stock market,” he added.
turbulence
In fact, the banking sector in Europe and the United States has just experienced two weeks of severe turbulence marked by the bankruptcy of Silicon Valley Bank (SVB) and two other American regional banks, as well as the bailout of Credit Suisse by the through a takeover by UBS forced by the Swiss financial authorities.
In North America, stock investors fear that other banks may have unexpected problems like the SVB. This Californian bank went bankrupt after customers withdrew their money in a crisis of confidence in the SVB, which had suffered considerable losses in bond investments due to the rise in interest rates.
In Europe, on Friday, the prices of loss risk hedging instruments – CDS or credit default swaps in financial jargon – soared for most of the big banks, in particular the German Deutsche Bank, which meant stock market investors’ lack of confidence in the banking sector.
Although the issues behind SVB’s bankruptcy had nothing to do with Deutsche Bank, investors were selling their Deutsche Bank shares out of fear. Fears of a potential liquidity crisis at some banks remain latent.
Jochen Stanzl, analyst for CMC Market in London
Meanwhile, while attending a summit of European heads of state in Brussels on Friday, German Chancellor Olaf Scholz reported a “stable” banking system despite the tremors being felt around Deutsche Bank .
For his part, French President Emmanuel Macron said that “the fundamentals of European banks are solid” in the wake of the tightening of banking regulations in Europe after the 2008 financial crisis.
But in the opinion of the rating agency Moody’s, there is still “a risk” that the financial authorities “will not be able to stem the current turmoil without this having more lasting and potentially serious repercussions in the within and beyond the banking sector.
With Agence France-Presse, Associated Press, The Canadian Press, Reuters and Refinitiv