Shares in Deutsche Bank, Germany’s largest, closed sharply lower Friday, amounting to 8.5%, as the high cost of insuring against default risks raised concerns about the resilience of European banks.
The stock closed at a loss of 8.53%, settling at 8.54 euros, after losing as much as 14% during the day, in the third consecutive session of declines on the Frankfurt Stock Exchange. Its competitor Commerzbank lost 5.45%, down to 8.88 euros.
Fear returned to gripping financial markets on Friday, especially in Europe, where the banking sector continued to decline despite statements by politicians who tried to reassure investors about the stability of the financial system.
In Europe, the stock exchanges declined by 1.74% in Paris, 1.66% in Frankfurt and 1.26% in London, after recording an improvement at the beginning of the week following the acquisition of Credit Suisse by UBS.
The banking sector in the broader Stoxx Europe 600 index declined by 3.53% after a sharp increase in the cost of insurance against default risks (CDS), which raised concerns about the resilience of European banks, led by Deutsche Bank.
Many European banks also closed lower. In Paris, Societe Generale shares fell 6.13%, the largest decline in the CAC 40 index, and BNP Paribas lost 5.27%. In London, Standard Chartered fell by 6.42%, Barclays (-4.21%) and NatWest (-3.58%).
– A matter of trust –
These declines occurred despite central banks’ move to provide liquidity and efforts to restore confidence in the banking system.
Neither the remarks of Christine Lagarde, President of the European Central Bank, and her reaffirmation of the resilience of the banking system which she said “has a solid position in terms of capital and liquidity,” nor those of German Chancellor Olaf Scholz or French President Emmanuel Macron, were able to calm souls.
The French president stressed that “the eurozone is the region in which banks enjoy the greatest degree of resilience,” while the German chancellor stressed that “there is no need for concern” for Deutsche Bank.
In Zurich, Credit Suisse fell by 5.19% and UBS by 3.55%.
Bloomberg said that these banks are among those suspected by the US judiciary of helping wealthy Russians circumvent Western sanctions.
In contact with Agence France-Presse, Credit Suisse refused to comment on these accusations, while UBS did not respond to similar questions directed to it by AFP.
As for the US indices, they moved quietly, with the Dow Jones index and the broader S&P 500 index approaching balance, while the Nasdaq index declined by 0.38% at around 17:00 GMT.
Banks recorded a decline in New York, but to a lesser degree, ranging between 0.19 and 2.69%, before Treasury Secretary Janet Yellen’s meeting with financial regulators on Friday, including Federal Reserve Chairman Jerome Powell.
– Demand for dollars and government bonds –
The bond market was once again a haven for investors, and the yield on US government bonds for 10 years was 3.37%, compared to 3.42% the day before the close.
As another safe haven, the dollar rose by 0.68% against the euro to $1,075 per euro.
Oil prices have also fallen, which often indicates that investors fear an economic recession.
A barrel of Brent crude from the North Sea for May delivery lost 1.37%, down to $74.88, while a barrel of West Texas Intermediate crude for the same period declined by 1.10%, settling at $69.19.
