(News Bulletin 247) – The Parisian index suffered significant losses at mid-session on Monday. The market fears the consequences of the bankruptcy of the Californian bank SVB, while a second establishment, Signature Bank, has been closed.

The Paris Stock Exchange is having a very difficult session on Monday. The CAC 40 thus dropped 2.23% at mid-session, to 7,059.61 points, and even experienced a low below 7,000 points (6,999.74 points).

Like all markets, the Parisian index is weighed down by fears surrounding the bankruptcy of Silicon Valley Bank (SVB) and its ramifications. This American bank threw an icy cold Thursday by announcing emergency sales of debt securities and was faced with massive withdrawals of deposits from its customers. It has now been closed and placed under the control of the American Deposit Guarantee Agency (FIDC).

This measure should make it possible to avoid a bank panic. In the same vein, another establishment, Signature Bank, was closed. The FDIC will guarantee all of the deposits of these two banks.

Bond relaxation

While many politicians and experts believe that large establishments do not run a real risk of contagion, the market fears that other regional establishments in the United States will suffer from difficulties.

In addition, the setbacks of these banks show the difficulties that can be created by cycles of monetary tightening by the major central banks, which reveal banking weaknesses.

In the face of fear over the SVB rout, Goldman Sachs estimates that the US Federal Reserve (Fed) should raise rates by 25 basis points (0.25 percentage points) after its next meeting on 22 next March, whereas it was previously counting on 50 basis points (0.5 point).

This explains why bond yields are clearly easing. For example, Germany’s 10-year bond is trading at 2.285% versus 2.504% on Friday.

The euro rebounds against the dollar

On the value side, dark red is in order. Almost no stocks are moving into positive territory. If the banks are at the back of the pack, with Societe Generale losing 6% and BNP Paribas dropping 5.9%, that’s by a short margin. All cyclicals are suffering, with Alstom losing 5.3% and Renault 5%.

Excluding the CAC 40, Faurecia fell by nearly 9%, also suffering from a downgrading of Morgan Stanley to “online weighting” against “overweight” previously.

On the other markets, the euro gained 0.3% against the dollar at 1.0676 dollars. Oil fell a little. The North Sea Brent contract for May delivery fell 1.5% to $81.52 a barrel while New York-listed WTI for April delivery fell 1.7% to $75.37 a barrel.