March 30, 2023

Great Indian Mutiny

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European banking stocks suffered the biggest drop in a year

London (CNN) Investors Dumped shares of European banks For the third day in a row on Monday, despite dramatic moves over the weekend by the US and UK governments to boost confidence in the financial system after Friday. Silicon Valley bank collapse.

The Stoxx Europe 600 Banks Benchmark in Europe, which tracks 42 large institutions in the European Union and the United Kingdom Banks were down 5.6 percent by mid-afternoon – their biggest drop since March last year. the widest Stokes Europe 600 (SXXL) The index fell 2.1%, while the bank heavy index fell FTSE 100 index (UKX) It was 2.2% down.

Shares in a beleaguered Swiss bank Credit Suisse (AMJL) It fell 12% to a new record high, before recovering. shares HSBC (FTRXX) decreased 3.8% Barclays (ATMP) 5.7%, Deutsche Bank (DB) 4.3% and Italy UniCredit (UNCFF) 7.5%.

The declines added to fears that the second-largest US banking collapse in history could be followed by more failures of weaker banks. This is despite interventions by officials on both sides of the Atlantic to stem the panic, and the relatively limited exposure among European banks to SVB and its clients.

“Investors are still rattled by the events of the past few days,” Susanna Streeter, head of money and markets at investment platform Hargreaves Lansdowne, told CNN.

The headquarters of the London Stock Exchange Group in the City of London, United Kingdom, on Thursday, March 2, 2023.

On Sunday, the Biden administration promised that customers of SVB and Signature Bank, which closed on Sunday, would get access access to all their money Starting on Monday. In disagreement with the former, the government guaranteed the return of even uninsured deposits.

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The Fed will also provide additional funding to eligible financial institutions to prevent run-ins on similar banks in the future. US banks lose $620 billion in unrealized losses — assets that have depreciated in price but have not yet been sold — as of the end of 2022, according to the Federal Deposit Insurance Corporation.

It is unclear how many unrealized losses the EU and UK banks have on their books.

Unusual moves by the US authorities They are designed to prevent further bank outflows and to help companies that have deposited large amounts of money with banks to continue to provide payroll and fund their operations.

HSBC (FTRXX)Europe’s largest bank, announced early Monday that it has He bought the UK arm of SVB For £1 ($1.2), effective “immediately”. The Bank of England has told SVB UK clients that all their deposits are safe.

Huge losses in Europe

Still, Investors were nervous In Europe, where officials have not yet promised any additional liquidity support for the banking sector in general, as happened in the United States.

“The deposit insurance scheme in the US is much more generous than it is in Europe, and there is growing expectation that the US Treasury will move quickly to fully insure deposits in the event of more bank failures,” Streeter said.

Chris Beauchamp, senior market analyst at trading platform IG, agreed. He said European investors were waiting for “verbal reassurance” from the European Central Bank, which may not come until Thursday when it next meets to set interest rates.

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“The move by the US authorities is a sign that they are responding quickly, while Europe still has to respond,” he told CNN.

Beauchamp added that the sharpest declines in European bank stocks seen so far on Monday may partly reflect those declines. Stronger performance For US banks this year.

The Stoxx Europe 600 Banks Index rose 21% in the first eight weeks of the year, about 12 percentage points higher than the KBW Bank Index, which tracks 24 leading US banks. Both indicators have declined since the beginning of March.

“The US markets have fallen more sharply over the past month,” Beauchamp said. “Too much pessimism may be priced in.”