(News Bulletin 247) – The Paris Stock Exchange is expected to start down sharply on Friday, fears of default by two US banks having heightened investor doubts about the health of the US financial system.
Around 8:15 am, the ‘future’ contract on the CAC 40 index tumbled 118.5 points to 7201.5 points, suggesting a drop of more than 1.5% at the opening.
Silicon Valley Bank (SVB) announced yesterday that it intended to launch a capital increase in order to bail out after suffering heavy losses on the sale of part of its bond portfolio.
The title of this 40-year-old company, which helps finance Californian technology companies, fell more than 60% last night at the close of Wall Street.
Still in the banking sector, Silvergate Capital, an institution very focused on cryptocurrencies, continued its fall (-42%) yesterday after having expressed its intention to go into liquidation soon.
These announcements caused the American stock markets to fall on Thursday, fearing a domino effect of the crisis on the model of the sequences which had precipitated the financial crisis of 2008.
The Dow Jones index of the 30 major industrial components ended down almost 1.7%, the broader S&P 500 fell 1.8%, while the Nasdaq composite dropped more than 2%.
It was mainly financial stocks that were attacked, with investors seeking to reduce their positions vis-Ã -vis the sectors most sensitive to current uncertainties.
The Bank of America share thus lost more than 6%, Citigroup around 4% and Morgan Stanley not far from 3%.
These fears have logically led to a rush towards less risky assets, such as gold or government bonds.
In the current state of things, the CAC 40 is therefore heading for a sharp decline over the week as a whole, even if it will be necessary to wait for the US employment report, scheduled for early afternoon, to see a real trend taking shape.
These figures will indeed be of particular importance to investors as the market expects the Federal Reserve to accelerate its rate hikes.
The challenge of this session is therefore simple and participants hope to learn of a reassuring figure that would allow them to validate the scenario of an upcoming ‘pause’ in the Fed’s monetary tightening cycle.
Economists expect a slowdown in job creation in February, after the sharp rise in January (517,000 jobs created), as well as a stabilization of wage growth.
With a consensus established at 200,000 new jobs, the markets know, however, that they have little room for manoeuvre, which led economists at Barclays to issue a serious warning yesterday.
‘We believe that solid figures of around 200,000 job creations would be sufficient to lead to a rate hike of 50 basis points at the end of the next FOMC’, had warned the teams of the British bank.
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