European stock markets fell again on Wednesday with the return of serious concerns about banks, including Credit Suisse after the largest Saudi shareholder ruled out a bailout of the troubled bank.
Paris fell by 3.25%, London by 2.34%, Frankfurt by 2.61% and Milan by 3.61% around 11:40 a.m. GMT (7:40 a.m. EDT).
US markets were also heading for a relapse at the open according to futures contracts, which pointed to losses between -1.5% and -1.8%.
Oil at its lowest since December 2021, sharply falling rates, rising dollar, wave of volatility: the signs of great nervousness among investors could be read on all markets.
The action of Credit Suisse suffered its worst day having plunged up to more than 22%, and touching a new historical low point at 1.75 Swiss francs. The panic was triggered after its largest shareholder, Saudi National Bank, explained via its chairman that he was “absolutely not” going to support the bank by increasing its capital, in an interview with Bloomberg TV.
The Saudi National Bank currently owns around 9.8% of Credit Suisse, just below the important 10% threshold beyond which other regulation applies. But Ammar al-Khudairy, of the Saudi National Bank, said there were other reasons than the “regulatory and statutory” ones.
Credit Suisse had to raise four billion Swiss francs (about 6 billion Canadian dollars) at the end of 2022 via a capital increase which had allowed the entry of the Saudi National Bank. In early March, a longtime shareholder, Harris Associates, threw in the towel.
Elsewhere in Europe, BNP Paribas fell by 12.02%, Société Générale by 11.93%, Banco Sabadell by 8.82%, ING by 8.26%, Commerzbank by 11.57%, Deutsche Bank by 8.22% , Unicredit of 7.39%. Since the beginning of the week, almost all of these banks have lost more than 10% of their stock market value, and some more than 15%.
The measures of the American authorities and the assurances of the European governments on the solidity of the banking system following the bankruptcy of the Silicon Valley Bank (SVB) were able to stabilize the markets a little on Tuesday. But “fears about the solidity of the sector” persist and “the shadow of the collapse of the SVB still hovers”, underlines Susannah Streeter, analyst at Hargreaves Lansdown.
Nobel laureate in economics Joseph Stiglitz did not rule out other failures in an interview with AFP on Wednesday.
Sign of a flight of investors towards investments perceived as safer, the borrowing rates of the States fell. The 10-year US loan fell to 3.52%, against 3.69% the day before. The even more sensitive 2-year rate fell below 4%.
Bond yields have fallen dramatically since the end of last week as investors believed the banking shock would cause central bankers to be more cautious in raising rates. And this, even if inflation remains at a high level, 6% in February in the United States, according to the CPI index published on Tuesday.
Prior to this news, in Asia, Tokyo failed to rebound (0.03%). Shanghai (0.55%) and Hong Kong (1.52%) rebounded after the announcement of a recovery in retail sales in China.
Signs of fear in all markets
Investors shunned any investments perceived as riskier or more sensitive to economic conditions.
WTI’s barrel slid below US$70 to its lowest level since December 2021. As of 11:00 GMT (7 a.m. EDT), it was worth $70.34 (-1.39%), down more 12% since Monday. The barrel of Brent from the North Sea was worth 76.26 dollars (-1.54%), down 10% since Monday.
The dollar took advantage of its safe haven status to rise against other currencies. The euro was down 1.11% at $1.0614 and the pound was down 0.74% at $1.2068 around 11:15 a.m. GMT (7:15 a.m. EDT).
Bitcoin held steady around $24,620 and gold held steady at $1905.70 per ounce.