(News Bulletin 247) – The Parisian index lost 1.3% on Friday, weighed down by the declines of the banks themselves penalized by the shock wave caused by the Californian establishment SVB, in financial difficulty. Investors also had to decipher US employment figures that were complicated to analyze.

The CAC 40 ended the week on a bad note. The flagship index of the Paris Stock Exchange, dropped 1.3% to 7,220.67 points at the close of Friday. This session alone was almost enough to bring down the index by 1.73% over the week as a whole.

A small wind of panic blew over the banking sector, following the setbacks of the American bank Silicon Valley Bank (SBV).

This establishment had to sell 21 billion dollars of financial securities in a hurry, suffering a loss of 1.8 billion dollars. Its parent company, SVB Financial Group has seized investors by announcing a capital increase of 2.25 billion dollars. This bank is trying to afford some oxygen while it is penalized by withdrawals from its customers – mostly technology companies – who themselves are weakened by the rise in interest rates on the markets.

Its action fell 60% on Thursday and is now suspended on Wall Street. According to CNBC, the bank is in discussions with larger institutions to find a buyer, after failing to complete its capital increase.

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A risk to put into perspective

Following these announcements, the banks found themselves under pressure, the market fearing that the banking panic hitting SVB would spread to other establishments. Societe Generale lost 4.5% and BNP Paribas 3.8%, thus beating the CAC 40. The other European banks also suffered, Deutsche Bank abandoning Frankfurt 4.7%, for example.

“Ultimately, today we are witnessing a very defensive reaction to a series of events that have left investors with many more questions than answers and raise fears of further ripple effects in the financial sector. We can understand this reaction, but we don’t yet know how long it will last and if it will get worse,” judge Craig Erlam of Oanda.

Nevertheless, analysts at Exane BNP Paribas believe that a disaster scenario is unlikely. “There is no systemic problem and therefore should not have any contagion or repercussions on European banks,” they said, quoted by Reuters.

On Twitter, the economist Mohamed El-Erian, economist and adviser to the insurer Allianz, estimated that “the risk of contagion and the systemic threat [pouvait] be easily contained by prudent balance sheet management”.

Casino down sharply

Investors also had to decipher US employment figures for February that were not very easy to analyze. Job creations, numbering 311,000, were clearly higher than expected, but the unemployment rate rose to 3.6% against 3.4% in January.

“As a result, it appears that the debate ‘between a 50 basis point (0.5 percentage point) and 25 basis point rate hike for the next US Federal Reserve meeting’ will hinge on the index of consumer price [la mesure de l’inflation, NDLR] of February, which is to be published next Tuesday”, considers Capital Economics.

As for values, apart from banks, Casino lost 5.6% after publishing significantly degraded annual financial results. Legrand fell 3.7% penalized by a lowering of the recommendation from “overweight” to “neutral”.

On other markets, the euro gained 0.8% against the dollar to 1.0588 dollar, the US currency showing a bout of weakness after US employment. Oil prices are gaining ground. The North Sea Brent contract for delivery in May is up 1% at 82.42 dollars a barrel while the WTI listed in New York for April is up 1% at 76.51 dollars a barrel.