by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to be in disorder at the opening on Monday and European stock markets fell sharply mid-session in a context of high volatility linked to fears of the impact of the collapse of the American bank SVB despite authorities’ attempts to reassure the market.

New York index futures suggest an open down 0.71% for the Dow Jones and 0.33% for the Standard & Poor’s 500, while the Nasdaq could gain 0.39% as bond yields ebb .

In Paris, the CAC 40 fell by 2.53% to 7,037.96 points around 12:30 GMT. In Frankfurt, the Dax dropped 2.64% and in London, the FTSE fell 2.29%.

The pan-European FTSEurofirst 300 index lost 2.31%, the EuroStoxx 50 in the euro zone 2.8%. The Stoxx 600 is down 2.35%, heading for its biggest decline since December.

Trapped by the accelerated rise in interest rates in the United States, SVB Financial Group, which operates as SVB, collapsed on the stock market last week after a surprise capital increase intended to make up for a loss of 1, 8 billion dollars, following the sale of a bond portfolio.

Faced with the threat of a withdrawal of customer deposits, the Fed has undertaken to make funds available to banks, via a new bank financing program, for institutions that need it.

The United Kingdom, for its part, said it wanted to “avoid the damage” linked to the fall of SVB, while in France, the Minister of Finance Bruno Le Maire, assured that there was no “specific alert” on the sector in France.

In Germany, without waiting for a possible decision from the European Central Bank (ECB), the Bundesbank chose Monday to convene a crisis meeting to assess the possible effects of the collapse of the American bank on its domestic market.

On the money and bond markets, the various measures announced are leading investors to lower their expectations of a rise in interest rates, so much so that the dollar depreciates against a basket of reference currencies and that yields on short-term borrowings term show a sharp decline.

According to the CME Group’s Fedwatch Barometer, the probability of a status quo on Fed rates after the March 21-22 meeting is now close to 33% and that of a hike limited to 25 points base at around 67%. The market was pricing last week with a 70% probability of a 50 basis point rate hike from the Fed this month before SVB collapsed.

Goldman Sachs, for its part, no longer expects a Fed rate hike in March and sees uncertainty about the trajectory of the cost of credit beyond that date.

A sign of nervousness, the index measuring volatility in the United States jumped from 17.17% to 29.06 points, while its European equivalent soared from 32.25% to 28 points.

“Investors are still reeling from the events of the past few days and are anxious to see if the repercussions for the financial sector will spread and create further problems,” said Susannah Streeter, head of foreign exchange and financial markets at Hargreaves Lansdown. .

WALL STREET VALUES TO FOLLOW

First Republic Bank fell 56.6% in pre-market trading, as concerns persisted about the risk for regional banks.

JPMorgan Chase & Co, Morgan Stanley and Bank of America yielded 1% to 5% in market preview.

VALUES IN EUROPE

In Europe, the setbacks of SVB weigh particularly on the banking compartment (-5.81%), finance (-3.81%) and that of insurance (-3.65%) while none of the major sectors of the rating does not escape risk aversion.

In banking stocks, which are heading for their largest decline in two consecutive sessions since the invasion of Ukraine by Russia, Commerzbank plunged by 12.14%, Société Générale by 6.13% and Sabadell by 10, 11%.

HSBC fell by 4.168% after announcing on Monday the acquisition for one pound sterling of the British subsidiary SVB.

In the other compartments, Sanofi dropped 1.6% after the announcement of the takeover of the American biotech Provention Bio for 2.9 billion dollars (2.7 billion euros), while SAP fell 2.5% after the sale of its stake in Qualtrics for $7.7 billion.

RATE

The yield on two-year US Treasury bills fell 41 basis points to 4.17%, its biggest single-session drop since 2008, after hitting a low since Feb. 3 at 4.157%.

Short-term yields in Europe are following the trend and that of the two-year German Bund is showing at 2.68%, the lowest since February 9, with a fall of 40 basis points, the largest drop in one session since January 1995.

CHANGES

The prospect of a less aggressive Fed after the rout of SVB weighs on the dollar, which gives up 0.29% against a basket of benchmark currencies.

The euro took advantage of this to rise to 1.0667 dollars (+0.23%).

METALS

Gold, a safe haven, continues to rise and hit a peak on Monday since February 3 at 1,893.96 dollars an ounce after having already gained 2% on Friday.

OIL

Oil prices are affected by fears of a new financial crisis in the wake of the fall of SVB: Brent falls 5.29% to $78.40 a barrel and US light crude (West Texas Intermediate, WTI) 5 .63% to $72.36.

(Written by Claude Chendjou, edited by Matthieu Protard)

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