Radical change of scenery in the world stock markets. The collapse of Silicon Valley Bank, Signature Bank’s intervention in the face of the growing risk of systemic contagion and the fear that First Republic Bank could follow the same path after a collapse of more than 60% at the opening of Wall Street that forced suspend their listing, have formed a cocktail that is impossible to digest for the European markets.
The indices suffered large falls in a high-voltage first session of the week. The Italian MIB led the move with a 4% drop, the German Dax fell 3%, the French CAC 40 2.90% and London’s FTSE 100 2.58%.
On Wall Street, the indices weathered the downpour with mild losses of 0.28% and 0.15% for the Dow Jones and the S
“Your deposits will be there when you need them,” said the President of the United States, Joe Biden, who has insisted that “the banking system is safe” and that his Administration will do whatever is necessary to tackle the situation.
The Ibex 35 lost 3.51%, leaving behind the level of 9,000 points and reducing the annual gain to 8.9%.
The largest fall of the year and the largest since June of last year was led by the financial sector, which, together with the flood of news from the US financial sector, had to quote the prospect of a new interest rate scenario.
Now, the market quotes that the price of money may have peaked or be very close to peaking in the United States. The fall of SVB and First Republic Bank may force the Federal Reserve to radically step on the brakes. The first touchstone is just around the corner: it will be at the meeting on March 22. Firms like Goldman Sachs believe that there will be no rate hike this month to avoid suffocation of the entities with the most difficulties to finance themselves.
As they point out from the analysis department of AXA IM, “it is likely that the situation will trigger more prudence from the Fed in the field of monetary policy. In the very short term, it will be difficult for the Federal Reserve to ignore the episode of SVB “.
The other unknown is to what extent this scenario can be transferred to Europe. Until last Friday, the market assumed a rise of 50 basis points at the meeting of the European Central Bank (ECB) on Thursday. Now, the bet is that the rise will not go beyond 25 basis points.
It is all about a black swan that stands in the way of the hitherto very placid path of European banks and, very specifically of the Spanish ones, converted during 2023 into the great stars of the sector.
The Ibex 35 Banks index lost 7.64% in a black day for the financial sector. Investors pointed to Banco Sabadell as the big loser with a fall of 11.81%. Bankinter and BBVA lost 8.54% and 8.24% respectively, while Unicaja and Santander fell by more than 7%. CaixaBank saved furniture somewhat better with a fall of 6.24%.
Among European banks, Commerzbank was the worst of the day with a decline of 12.7%. Unicredit and Bawag gave up 9%. In the United States, in addition to the collapse of the First Republic, Zions Bancorp, Comerica and Keycorp suffered falls of more than 20%. But the trail of losses also extended to large entities such as Citigroup, Wells Fargo, Bank of America or JP Morgan, they also suffered with declines of between 6% and 10%.
But in a national key the collapse is even more intense if the falls of last Friday are computed, when the Ibex 35 lost 3.51% in full collapse of SVB. The Spanish banks that benefited the most from the rate hike are now the hardest hit.
The best example is Sabadell, which has lost 16.3% in the last two sessions. No other European bank has been so heavily penalized since the start of the US bank liquidity crisis.
Bankinter, BBVA and Santander are among the ten most punished European banks in the last two days, in a demonstration that the most conservative investors and those who had more accumulated capital gains are undoing positions at full speed. Keep in mind that despite the plunge on Friday and Monday, domestic banks are still up between 13% and 84% (see chart) since the start of the rally in January 2022.
Between the sessions on Friday and Saturday, the market value of the six listed banks has fallen by just over 13,300 million euros to 142,908 million euros. A process that occurs with an extraordinary volume of recruitment.
On Friday, bank shares worth 706 million euros changed hands, a figure that doubled the average for trading in the first sessions of March.
But yesterday, in the midst of the price collapse, the activity shot up to almost 1,000 million euros from a total negotiation of 2,193 million euros.
Thus, there was a large volume of selling that bargain hunters responded to with purchases as banks hit their lows for the day. Opinions are divided between those who believe that the crisis of confidence generated in the US banks may have more to do on the stock market and among those who believe that the sharp correction is a buying opportunity.
Filippo Alloatti of Federated Hermes Limited believes that “the problems SVB faced were more related to its customers and the industries it served than to issues related to its core banking operations.”
In relation to the possible impact that it may have on the European banking sector, Alloatti indicates that “there are no European banks listed on the stock market with a similar business model.”
With the banks monopolizing all the leading role, the money sought refuge in the energy sector. Enagás led the gains with a rise of 1.62%, while Red Eléctrica, Naturgy, Acciona Energía and Solaria obtained gains between 0.3% and 0.9% (see page 22).
Only seven Ibex stocks avoided losses in a session in which, in addition to the banks, Mapfre, Meliá Hotels, Repsol and Arcelor Mittal suffered falls of between 4% and 5%.
Inditex, which publishes its results tomorrow Wednesday amid expectations of record figures, lost 2.15% and is far from the level of 30 euros that it had within reach in the first part of last week.
The new interest rate expectations in the United States had a strong impact on all markets.
In terms of currencies, the euro rose almost 1% against the dollar to levels of 1.07 and puts pressure on European exporting companies.
One of the big winners of the day was bitcoin, which until last Friday was under pressure due to expectations of more and stronger rises in the price of money in the United States.
The cryptocurrency icon was soaring around 15% above $24,000. For its part, ethereum rose a little more than 10%.
In a climate of uncertainty that triggered the VIX index by 5% to levels of last October, gold also benefited from the correction of the dollar and the possible halt in the rise in rates in the United States. The yellow metal was up nearly 3% to above $1,900 an ounce, the highest level since April 2022.
