European stock exchanges are sinking on fears that the bankruptcy of Silicon Valley Bank (SVB) could spread to the global financial system despite the intervention of the US government and the Fed to try to contain the crisis.
The Frankfurt Stock Exchange dropped 2.6%, Paris 2.8%, London 2.3%. Business Square and the Madrid Stock Exchange both mark a (-4%) while the Nasdaq opens the session with a (+0.3%), futures rose by 2% in the morning, to then reverse course and slow down considerably.
The crash of global stock exchanges and banking stocks sent i government bonds whose yields are in a nosedive: on average in the Eurozone over 20 basis points on the ten-year part. The Italian decennial falls to 4,15% (-14 basis points) but fears about the Italian public debt cause an increase of almost ten points in the spread with the Bund, rising to 190 basis points.
Biden reassures: “American deposits are safe”
Despite the assurances of the President of the United States, Joe Biden on the banking sector, the title Western Alliance Bancorp collapses of 78% at the opening session of Wall Street, currently at $10 per sharethe lowest price since 2013.
Interviewed by journalists attending the press conference, the US president was asked if there will be a domino effect on the banking sector and if he could explain why the bankruptcy occurred. Joe Biden did not answer reporters’ questions.
But he commented: “Americans can rest assured: their deposits are safe“. Biden said on the collapse of the SVB and the strains on the banking system “No losses will be borne by the taxpayers.” The US President said about the “rapid” measures taken by the administration in collaboration with the competent authorities for the bankruptcy of the Sillicon Valley Bank.
In addition, the US President has said he will try to introduce tougher regulations for banks. And he said people running troubled banks should be fired.
As for investors in troubled banking companies, he said: “Investors in failed banks will not be protected. They knowingly took a risk, and when the risk hasn’t paid off, investors lose their money.”
The sell-off on banks continues
Concerns over new SVB cases among US regional banks are materializing on Wall Street where First Republic Bank yields beyond 70% at $19 a share, after falling 33% last week despite reassurances about its cash position. The title is even worse Western Alliance Bancorp which collapses of 78% at $10 a share. The index measures the degree of fear on the markets VIXwhich measures volatility on Wall Street, jumped to its highest level since last October at 28 marking an increase of 17%.
“The solution proposed by the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation (FDIC) to deal with the bankruptcy of Silicon Valley Bank (SVB) has not curbed the loss of investor confidence in the US financial sector and indeed has shown a spread even in Europe. Not even the words of President Joe Biden, ready to do anything necessary to protect the banking sector, have had the effect of easing recent tensions.” he commented Philip DiodovichSenior Market Analyst Tue IG.
According to Diodovich, the FED measures and Biden’s reassurances did not work “because the Government and the FED internalized the problems of SVB and Signature Bank and future regional banks in difficulty within the US banking sector, involving even the healthiest banks, thus increasing the risk of insolvency also to all those institutions that have undertaken to heal their balance sheets.
We recall that just today the London giant, HSBC today took over the British branch of Sillicon Valley Bank for 1 pound and currently yields slightly more than 3% during the London session. The British Government of Rishi Sunak and the Bank of England announced that they have brokered the sale of SVB UK to banking giant HSBC.
In a statement signed by the Chancellor of the Exchequer of the United Kingdom, Jeremy Huntand the BoE states that “deposits are protected” and that “there are no other British banks directly significantly affected by these developments”.
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