Concerns have been growing in the markets that problems in the US banking sector could be a harbinger of bigger problems in the markets as the US economy begins to feel the effects of higher interest rates.
On Thursday in the US, Silvergate Capital announced plans to voluntarily wind down and liquidate the cryptocurrency bank. More concerns came from the Silicon Valley Bank (SVB), which announced a $2.25 billion equity offering to replenish its dwindling capital. In order to improve liquidity, the bank had to sell about 21 billion US dollars worth of bonds. And achieving a loss of 1.8 billion.
The bank’s shares fell by 60 percent. On Thursday, the situation translated into dire sentiment towards the entire sector, such that major US banks, such as Bank of America Corp., fell. And Wells Fargo and JPMorgan Chase, by at least 5 percent, and the sector index, by 7.7 percent. . – The strongest in almost 3 years. This coincides with a week in which investors are facing “hawkish” announcements from the Chairman of the Federal Reserve.
A significant decline was observed in the main indices in the stock markets. In Japan, the Nikkei 225 lost 1.67 percent and the Hang Seng Index in Hong Kong fell 2.58 percent. The cryptocurrency market is down sharply, with bitcoin posting its biggest daily drop since the FTX stock market crash.
The German DAX and the French CAC40 fell in the first part of the session in the range of 1.6-1.7 percent. The European banking sector drew attention, with the EURO STOXX Banks index losing 4.1 percent. In the afternoon, when NFP data from the United States was released on the market, indices in Europe made up for some of the losses, and the DAX index was already down by about 1 percent. Reasons must be sought in the new assessment of the March rate hike by the Federal Reserve, which in the face of new conditions and despite strong US data is currently priced at 25 basis points.
In Warsaw, the WIG20 lost 1.8 percent. The WIG Index fell 1.7%. In contrast, mWIG40 lost 1.6 percent. and sWIG80 1.4 percent. WIG-Banki fell by 2.57 percent.
In the WIG20, Cyfrowy Polsat (-3.5 percent), JSW (-3.6 percent) and Picao (-4.1 percent) suffered the biggest discount. Banks took the next positions, such as mBank, which fell by 3.1 percent, and Santander (2.7 percent). The share price of PKO BP Bank, which showed the results, decreased by 1.5 percent, although in the opinion of analysts the financial report is a good prediction of the future and profits in the coming quarters.
Kęty price was the strongest, falling less than 1%. The price of Kruk rose (by 6%), showing results for 2022 on the Thursday after the session and profits of more than PLN 805 million, compared to PLN 695 million a year ago. After at 3.00 pm, CCC (2%) and Dino (0.5%) were also on the positive side in the leading portfolio, which improved the historical maximum and reached the price of PLN 410.10 per share.
In the mWIG40, shares of banks such as Millennium, Alior and ING fell in the range of 3-4 percent. Shares of Ten Square Games fell the most (-10%), reporting write-offs of more than PLN 14 million. The prices of 9 companies declined in the afternoon, as Benefit shares rose (4.4 percent).
“It is clear that concerns about SVB in the US are spilling over into European stock markets, raising concerns about a potential credit crunch,” says Joachim Clement, head of accounting and sustainability strategy at Liberum Capital, quoted by PAP.
“However, I don’t think this poses any threat to the European banking system,” he adds.
Shares of SVB Financial Group fell as much as 66% in pre-session trading on Friday. They closed Thursday’s Nasdaq session down 60 percent.
Clement points out that SVB has a highly specialized business model, focused on venture capital and early-stage companies.
“No other bank has a similar business model, and although the number of non-performing loans is likely to increase this year, the capital reserves of banks in Europe and the United States are sufficient to deal with problems,” Clement emphasizes.
“The difficult situation of Silicon Valley Bank makes people fear the state of other financial sector institutions. SVB has been a very strong and well-managed bank so far,” ukasz Zembik of Oanda TMS Brokers wrote in the commentary. – wrote ukasz Zembik of Oanda TMS Brokers in the commentary.
In addition, investors are waiting for afternoon data from the US labor market on Friday, analysts estimate that the unemployment rate in February was 3.4 percent, as in January, and the number of new jobs in the non-farm sector increased by 225 thousand. . compared to an increase of 517,000 in January.
Data from the labor market will be an important signal for the Fed’s central bankers when determining the course of changes in US monetary policy in the coming weeks.
Recently, however, the relevance of this report has been somewhat less due to the fact that inflation has become the main issue and market attention has been focused on CPI and PCE readings. Now that Powell himself has pointed out directly that this is this report that It will have a significant impact on March’s decision on interest rates, and the publication’s ranking will rise significantly” – comments Zembik.
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