European stocks tumbled on Friday, following a massive sell-off on Wall Street amid a sudden crisis of confidence in the banking sector.[0] Banks led the losses across the blue-chip index, with London, Frankfurt and Paris all down by close to 2%.[1] Credit Suisse fell to an all-time low and financials on the FTSE 100 dropped around 4%, with HSBC -5.3%, and Barclays -5.4%.[0]
The losses were due to the SVB Financial Group’s announcement that it needs to raise up to $1.75 billion, spreading fears across the globe. Sharply declining were Bank of America, Citigroup, and other key banks.[2] The Stoxx Europe 600 Banks index, which tracks 42 big European banks, sank by more than 4%.
The Stoxx Europe 600 Banks Index slumped 3.6% as of 11:47 a.m. in London, the biggest drop since September. All 42 members of the gauge saw a decrease, with Deutsche Bank AG of Germany experiencing the greatest decrease, down 7.2%.[3] Yields on 10-year bonds declined, with Germany’s 10-year yield down 12 basis points to 2.52% and Britain’s 10-year yield down 10 basis points to 3.69%.[4]
The dramatic sell-off in US bank stocks was prompted by the Silicon Valley Bank, which was compelled to raise new capital after losing $1.8 billion selling a package of mostly U.S. bonds to satisfy depositor demands for cash.[5] SVB has experienced difficulties due to a decrease in deposits from customers, including a number of venture capital companies.[6]
“However, in a heavily interconnected banking industry it’s not so easy to compartmentalise these sorts of events which often hint at vulnerabilities in the wider system. The fact SVB’s share placing has been accompanied by a fire sale of its bond portfolio raises concerns,” said Russ Mould, investment director at UK broker AJ Bell.[7]
Silvergate Capital Corp. announced their plan to terminate operations and liquidate resources upon the crypto industry’s financial downturn, contributing to the negative sentiment.[8]
0. “Bank stocks plunge after SVB plummets, NFP ahead” FXStreet, 10 Mar. 2023, https://www.fxstreet.com/analysis/bank-stocks-plunge-after-svb-plummets-nfp-ahead-202303100926
1. “FTSE 100 lower at the open as bank shares plummet” Yahoo News, 10 Mar. 2023, https://news.yahoo.com/ftse-100-lower-at-open-bank-shares-plummet-085823589.html
2. “European shares plunge as US bank crisis rocks financial stocks – panic across globe” Express, 10 Mar. 2023, https://www.express.co.uk/finance/city/1744729/europe-bank-shares-stocks-svb-crisis-Silicon-Valley-Bank
3. “Banks Slump to Deal Blow to Engine of Europe’s Strong Rally” Bloomberg, 10 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-10/banks-slump-to-deal-blow-to-engine-of-europe-s-strong-rally
4. “European market lower. reflecting Wall Street mood” Seeking Alpha, 10 Mar. 2023, https://seekingalpha.com/news/3946327-european-market-lower-reflecting-wall-street-mood
5. “U.S. Bank Sell-Off Sends Ripples Through Europe’s Lenders – Heritage Times” The Heritage Times, 10 Mar. 2023, https://www.theheritagetimes.com/u-s-bank-sell-off-sends-ripples-through-europes-lenders/
6. “European Midday Briefing: Banks Slide on Bond Holding Worries” Morningstar, 10 Mar. 2023, https://www.morningstar.com/news/dow-jones/202303103128/european-midday-briefing-banks-slide-on-bond-holding-worries
7. “European banking stocks sink as Silicon Valley Bank jitters spread” CNBC, 10 Mar. 2023, https://www.cnbc.com/2023/03/10/european-bank-stock-sink-as-silicon-valley-bank-contagion-spreads.html
8. “French, German banks take a pasting on solvency fears at US lender” RFI English, 10 Mar. 2023, https://www.rfi.fr/en/international/20230310-french-german-banks-take-a-pasting-on-solvency-fears-at-us-lender