Bank failures across the Atlantic revive the specter of the 2008 financial crisis that had destabilized the global economy. BRENDAN MCDERMID / REUTERS
THE UPDATE ON THE SITUATION – Despite the financial assistance of the central bank, the action of the Swiss bank plunges. And the action of First Republic opens down more than 20% on Wall Street.
The respite was short-lived. The markets fell back into the red this Friday in the middle of the session after the relapse on the Stock Exchange of the weak links in the banking sector First Republic and Credit Suisse despite the firewalls to prevent the situation from getting out of hand.
Relieved in the morning by the financial aid provided to these two banks and comforted by the assurances of the European Central Bank (ECB) for the euro zone, the indices were finally down, from Paris (-0.59%) to Milan (-0.27%) via Frankfurt (-0.39%) and London (-0.29%) around 12:20 GMT.
The New York Stock Exchange opened in the red on Friday, under the influence of a renewed feverishness of the investors concerning the instability of the banking system. Around 1:50 p.m. GMT, the Dow Jones fell by 0.80%, the Nasdaq index fell by 0.25% and the broader S&P 500 index lost 0.48%.
Wall Street ended Thursday’s session with a bang, enthused by the intervention of a group of large American banks, which will deposit 30 billion dollars in the coffers of First Republic, considered the new weak link in the system. The euphoria was short-lived and the indices quickly showed signs of running out of steam in post-close electronic trading.
On Wall Street, the action of the bank First Republic opens down more than 17%. Eleven major American banks have nevertheless pledged on Thursday to come to its rescue, by depositing 30 billion dollars within this establishment to strengthen its liquidity and prevent the situation from worsening after the bankruptcies of Silicon Valley Bank, Signature Bank and Silvergate last week. An effort hailed by the US Federal Reserve (Fed), the Treasury and two financial regulators, while investors are terrified of a possible risk of contagion to other banking establishments.
Cash injections
In a sign of financial strain, US banks have since borrowed a total of $164.8 billion from two US Federal Reserve guarantee facilities in recent days, according to financial news agency Bloomberg. But the action of First Republic, the 14th American bank by the size of assets, lost more than 13% in electronic trading before the opening of Wall Street. And that of Credit Suisse relapsed sharply on Friday (by more than 10% around 12:00 GMT) after recovering 19.15% the day before, without managing to compensate for the worst fall in its history on Wednesday (by almost 25%) paying the price for the concerns about the banking system.
The struggling banking giant has received support from the Swiss central bank to bolster its liquidity, while speculation of a takeover of the banking giant has resurfaced, analysts say. The Governor of the Banque de France François Villeroy de Galhau wanted to be reassuring. “French and European banks are extremely solid“, he said Friday on BFM Business, and”are not in the situation of certain American banks».
However, the European Central Bank (ECB) for its part brings together its supervisory body for banks in the euro zone on Friday for a “exchange of viewson the banking sector after the turbulence of the past few days, AFP has learned. This is the second time this body has been convened this week for a meeting.to this», outside the usual timetable, given the rapid developments affecting the banking sector.
Since the announcement of the ECB’s strategy, signs of appeasement have been confirmed on the government bond market, which has been extremely volatile this week. All of this banking turmoil has fueled speculation that central banks may be easing their stance on inflation to avoid a severe recession. On Thursday, however, the ECB reaffirmed its determination to fight still-high inflation by raising its key interest rates by an additional 0.5 percentage point, but refraining from deciding on further monetary tightening. For its part, the OECD raised its global growth forecasts for 2023 and 2024 on Friday thanks to lower inflation and the reopening of China. But she mentioned several risks including the difficulties encountered by some banks.