(News Bulletin 247) – The Paris Bourse should start on a cautious note on Monday at the start of a week that promises to be lively both on the monetary policy front and on that of businesses and the economy.

Around 8:15 a.m., the ‘future’ contract on the CAC 40 index – delivery at the end of March – fell 13.5 points to 7210.5 points, signaling a slight drop at the opening.

With the bankruptcy of the Silicon Valley Bank (SVB), US inflation and the decisions of the European Central Bank (ECB), the days to come will be strewn with pitfalls for the equity markets.

The setbacks of the SVB have reminded investors that the financial system remains fragile in a context of rising interest rates and slowing activity.

The news caused a wave of panic last week on global stock markets due to fears of a possible domino effect that could affect leading banking institutions.

It seems difficult to assess the exposure of the banking sector to the file, but a good number of analysts are trying to allay the worries that have recently appeared among investors.

‘While news of a bank failure immediately brings back memories of the 2008 financial crisis, we believe it is too early and still unwarranted to draw such comparisons at this time’, write the teams of the American broker Edward Jones.

‘We believe that credit risk should not be discounted with the weakening of economic conditions, but SVB remains a very small institution (200 trillion dollars in assets) compared to the American banking system (19.8 trillion dollars )’, adds the broker.

Another reason for relief, the Fed guaranteed this weekend that all customers of the Californian bank could recover their funds and some strategists believe that this crisis situation could lead the central bank to give up raising its rates next week.

If the problems of American banks were to worsen, the sharp decline suffered last week by the major stock market indices could well be prolonged.

The CAC 40 fell 1.7% over the past week, but still maintains a solid gain of 11.5% since the start of the year. In the United States, the major indices posted more sustained weekly losses of around 4.5%.

Caution on the world markets should be reinforced by the expectation of the publication, tomorrow, of the latest inflation figures in the United States, which should make it possible to determine whether the rise in prices is finally receding.

In terms of monetary policies, the ECB – which is far from having achieved its inflation target – should once again raise its key rates by 50 basis points on Thursday and stay the course for future rate hikes.

With inflation expected to remain fairly buoyant and further interest rate hikes to be expected, the current setup creates a challenging environment for risky assets, as the recent chaotic performance of equity indices shows.

‘It seems too early to us to place big risky bets on the mere hope that central banks will do everything exactly right, at the right time, without the markets losing their minds at some point along the way. ‘, recently warned Björn Jesch, director of investments at DWS.

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