The European stock exchanges are sinking on fears that the failure of the Silicon Valley Bank could spread to the global financial system despite the intervention of the US government and the Fed to try to limit the crisis. Frankfurt dropped 3%, Paris 2.8%, London 2.3% while Nasdaq futures, which rose 2% in the morning, turned down.
Piazza Affari and Madrid lose 4.2% and 4.4% wearing the black jersey in a Europe that sees sales hitting banks with particular vehemence (-5.9% the sector index), semiconductors ( -4.1%), insurance (-4%) and cars (-4%). Fears of a financial shock that could increase the risk of a recession prompted the market to reassess the accounts in the pockets of central banks, cutting forecasts for rate hikes. If Goldman Sachs no longer expects any hike in March for the Fed, the money market will cut the ECB’s terminal rate to just over 3.5%, which some still saw gliding to 4.5% a week ago.
GOVERNMENT BONDS
The change of scenario has caused government bonds to take off, the yields of which are plummeting: on average in the Eurozone over twenty points on the ten-year part, even double for France and Germany on the two-year period. The Italian 10-year bond falls to 4.15% (-14 basis points) but fears about Italian public debt cause an increase of almost ten points in the spread with the Bund, which rises to 189 basis points.
Concerns over new SVB cases among US regional banks are materializing on Wall Street where First Regional Bank drops more than 60% in pre-trading, despite reassurances about its liquidity position. HSBC, which took over the British branch of the SVB for one pound, dropped 3.4%. To measure the degree of fear on the markets is the Vix index, which measures volatility on Wall Street, which jumped to its highest level since last October
ANSA agency
‘Our action will be strong, the banking system is resilient’. The Fed, ready to deal with any liquidity problem. A second bank, Signature Bank, has been closed by the authorities (ANSA)
TODAY THE EUROGROUP
The Eurogroup scheduled for today will also “discuss” the collapse of the American Svb. This was stated in an interview with Bloomberg TV by the president of the Eurogroup, Paschal Donohoe. “The euro area’s exposure to the American Svb” is “very limited”, explained Donohoe, underlining that in the old continent there is a very strong framework of rules in terms of supervision and crisis management.
The Ministry of Economy and Finance let it be known that the developments in the events linked to the Silicon Valley Bank and the decisions taken by the American monetary authorities are being closely followed. And he explains that “the Italian and European banking system is regularly monitored by the supervisory and supervisory authorities, thus ensuring its stability”.
“We appreciate the promptness with which the American authorities have intervened – writes the MEF – and we trust that, if necessary, the European authorities will also intervene with the same promptness, also assessing the implications for the conduct of monetary policy and for financial stability”.
France’s finance minister, Bruno le Maire, sees no risk of contagion for the country’s banks since the collapse of SVB given that the sector “is solid”. Speaking to France Info, the minister explained that “what happened in the United States is unique, with a bank that is exclusively exposed to the technology sector”. “There is no specific alarm for the French banking sector, we are certainly following the story closely,” he added.
The German finance ministry is also monitoring the situation together with the Bafin (supervisory body that corresponds to Consob in Germany) and the Bundesbank.