Dhe Dax extended its losses from the past week on Monday. The banking sector remains a concern for investors. The possible consequences of the collapse of the Silicon Valley Bank (SVB) in the USA are currently being weighed, a stockbroker explained. In the morning, the leading German index fell by up to 3.3 percent to 14,914 points. The Dax then recovered somewhat and most recently was back above 15,000 points. The M-Dax lost 3.0 percent to 27,171 points. The Eurozone leading index EuroStoxx 50 fell by 2.7 percent to 4117 points.
Deutsche Bank’s share price fell another 7.0 percent after losing a good 7 percent on Friday. Commerzbank stocks have since fallen by 11.8 percent after falling 2.6 percent on Friday. Bank shares were under pressure across Europe, the Stoxx bank index fell by 8 percent. In Zurich, the shares of the crisis-ridden Credit Suisse fell by 8.7 percent to a new record low of 2.28 francs. UBS shares fell 3.5 percent. the banking index fell 3.9 percent.
Bafin orders moratorium
The securing of all deposits by the US authorities after the faltering American start-up financing bank SVB and the New York Signature Bank had to be closed has not yet brought the hoped-for calm to the stock markets. “But it also shows how seriously the US Federal Reserve, the FDIC security fund and the Treasury take the case,” said portfolio manager Thomas Altmann from the trading house QC Partners. “The big and crucial question now is how many banks will follow.”
Even before the weekend, the SVB, which specializes in start-up financing, had been temporarily closed and placed under state control after a failed emergency capital increase. The financial services regulator Bafin ordered a moratorium on SVB’s German branch in Frankfurt on Monday. The supervisors justified the decision with “the existing risk for the fulfillment of obligations to creditors”. Silicon Valley Bank in Frankfurt is a banking partner of German companies such as Hellofresh and Lilium.
The Bafin measures are about a ban on sale and payment. In addition, the German SVB has to close the bank for dealings with customers. However, Bafin sees no threat to financial stability from the SVB’s plight. The balance sheet total of the branch in Frankfurt was 789.2 million euros at the end of 2022. Nevertheless, the Bundesbank’s financial crisis team will also discuss the possible effects of the SVB collapse on Monday. The committee comes together to analyze the situation and to discuss the possible consequences for the German financial sector and the financial markets, said a Bundesbank spokesman on request.
Doubts about rate hikes by the Fed
At the weekend, the US Treasury Department, the US Federal Reserve and the US Deposit Insurance Agency declared that deposits at the SVB and another institution would be protected. The US Federal Reserve also launched a new loan program to provide banks with liquidity.
The economists at US bank Goldman Sachs, led by Jan Hatzius, also expect that the recent events in the US banking system should prompt the Fed to interrupt its monetary tightening cycle next week. They also referred to the uncertainty about further rate hikes in the coming months. Concerns about the US banking system also pushed the Japanese stock markets into the red on Monday. The Tokyo Nikkei Index, which comprises 225 stocks, closed 1.1 percent lower at 27,833 points. The broader Topix index fell 1.5 percent to 2001 points.
However, the protection of all deposits by the US Federal Reserve, the FDIC and the Treasury Department should stabilize investors in the long term, analysts said. “Shares are likely to return to previous levels by Tuesday,” said strategist Kazuo Kamitani of Japanese investment bank Nomura.
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