Investors continue to undo positions in the European stock markets at the beginning of this new week. The red numbers are imposed at the opening of this Monday, contrary to what was previously suggested by European futures and despite the rebound of more than 1% that those on Wall Street anticipate. Therefore, the losses of Friday are extended. The decreases reach 2% after the first bars of the day: the EuroStoxx 50 loses the level of 4,200 points and The Spanish Ibex 35 leaves behind the barrier of 9,200testing their respective supports, according to the technical analysis of Ecotrader.
Link Securities analysts recall that last trading day “there was an obvious flight from risk, with investors ‘crushing’ the values of the banking sector (…) and clearly betting on sovereign bonds”. What happened? The stock market crash of Silicon Valley Bank (SVB) on Thursday, which dragged down other North American banks, unleashed nervousness in markets around the world. In fact, the Californian entity was liquidated by the US authorities on Friday afternoon. “This is not a ‘rescue’, but a private solution,” Bankinter experts explain in their daily commentary. The Federal Reserve (Fed), they add, “has enabled emergency liquidity so that depositors have their funds (even those that exceed the legally guaranteed amount) while managing their sale to another bank.” In this sense, just a few hours ago it became known that HSBC is going to buy the British subsidiary of SVB and will protect the firm’s deposits.
“It seems that the problem has been stopped in time and contagion (to the rest of the banking sector) is unlikely,” considers Bankinter’s Analysis Department, which sees the threat from Silicon Valley Bank as “neutralized”. On the other hand, from Renta 4 they emphasize that “it is the second largest bank bankruptcy in the history of the United States after the collapse in 2008 of Washington Mutual” to which is added the closing yesterday of Signature Bank of New York.
Central banks in the spotlight
Thus, the European stock markets fell sharply this Monday despite the strong rises registered by the US stock futures and those recorded this morning in the Asian parquets (South Korean Kospi: +0.67%; Shanghai: +1.20 %), except the Japanese (Nikkei 225: -1.11%). And it is that, in parallel to the debacle of SVB, the pressure from the market on the Fed has been reduced so that it continues increasing interest rates. In fact, Goldman Sachs analysts already expect the US central bank not to touch the price of money at its next meeting, on the 22nd of this month. Before it will be the turn of the European Central Bank (ECB), on Thursday. The rise in the price of money implies a greater profitability of the banking business and, therefore, the forecast that the central bank will lift its foot on the accelerator sooner than previously expected is not good news. a priori for the sector.
This could explain the marked losses suffered by the large financial firms in Europe this Monday, being the main drag on the EuroStoxx and the Ibex, in a session in which the agenda does not have other business or economic references of interest in the markets.