by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to fall and European stock markets fell sharply mid-session in a context of renewed risk aversion in the banking sector despite attempts by the authorities to reassure the markets.

Futures on New York indices signal an opening on Wall Street down 1.08% for the Dow Jones, 0.86% for the Standard & Poor’s 500 and 0.56% for the Nasdaq.

In Paris, the CAC 40 fell by 2.28% to 6,976.65 points around 12:40 GMT. In Frankfurt, the Dax dropped 2.37% and in London, the FTSE lost 1.71%.

The pan-European FTSEurofirst 300 index fell by 1.66%, the EuroStoxx 50 of the euro zone by 2.33% and the Stoxx 600 by 1.80%.

Over the week as a whole, however, the CAC 40 has gained 0.81% at this stage and the Stoxx 600 0.50%.

Banking stocks are neglected Friday in Europe as investors fear that the difficulties of US regional banks and Credit Suisse will spread to the heavyweights of the sector, in particular Deutsche Bank. The Stoxx banking index, the biggest sectoral drop, dropped 4.75%, heading for a third consecutive week of decline.

Faced with banking stress, US Treasury Secretary Janet Yellen reaffirmed Thursday that she is ready to take further steps to ensure that Americans’ bank deposits remain safe.

“The volatility continues because concerns continue to bubble over the stability of the US banking sector,” said Susannah Streeter, director of foreign exchange and financial markets at Hargreaves Lansdown.

“Even as they (the central bankers and the US Treasury) try to reassure the markets that they will be ready to take action if necessary, investors see this as proof that regulators, central bankers and the US administration are still concerned about a risk of contagion,” she added.

Mistrust of banks took precedence over the publication of the PMI indices on Friday, which showed an unexpected acceleration in the growth of private sector activity in the euro zone in March with a composite index at 54.1 after 52.0 in February. In Great Britain, if the growth of business activity slowed in March with a composite PMI index at 52.2, professionals have however become more optimistic about their prospects for the coming year.

WALL STREET VALUES TO FOLLOW

The big banks JPMorgan Chase, Wells Fargo and Bank Of America were down more than 2% on the market amid fears of contagion in the banking sector. Regional banks First Republic Bank, PacWest Bancorp, Western Alliance Bancorp and Truist Financial fell from 2.1% to 2.8%.

Block still yielded 4.2% ahead of the market after a 14.8% drop on Thursday, following accusations by the investment fund Hindenburg Research that the number of users of the payment platform is artificially inflated.

VALUES IN EUROPE

Deutsche Bank, down 13.4%, is at the bottom of the Stoxx 600. The German bank is fueling concerns about the stability of the banking system with a sharp increase in the cost of insurance against the risk of payment default, its five-point CDS years soaring 200 basis points, the highest since early 2019, according to data from S&P Market Intelligence.

Credit Suisse and UBS respectively yield 5.77% and 5.28%, the Bloomberg agency having reported that the two banks are among the establishments targeted by an investigation by the American Department of Justice on aid to Russian oligarchs.

In Paris, Crédit Agricole, BNP Paribas and Société Générale drop from 2.83% to 6.68%.

Raiffeisen Bank International fell 5.96% in reaction to a report from Reuters that the European Central Bank (ECB) is pressuring the Austrian bank to end its activities in Russia.

RATE

The yield on ten-year Treasuries fell to 3.3187%, after falling 20 basis points over the previous two sessions, in the perspective of a moderation in Fed rates in view of the banking environment.

Its German equivalent follows the movement and yields 13.1 basis points to 2.055%.

CHANGES

Risk aversion is favoring the dollar, which is up 0.63% against a basket of benchmark currencies, while the euro is trading at 1.074 dollars (-0.83%), despite good PMI figures in Europe.

OIL

Oil prices are falling after US Energy Secretary Jennifer Granholm’s statement that it could take years to fully fill US strategic crude reserves, clouding demand prospects.

Brent lost 3.39% to 73.34 dollars a barrel and US light crude (West Texas Intermediate, WTI) 3.69% to 67.38 dollars.

Over the week as a whole, the two oil benchmarks are however heading for a slight gain after recording their biggest weekly drop in months last week.

METALS

Gold, a safe haven asset, is approaching the $2,000 threshold and gained 0.17% to $1,996.95 an ounce around 12:40 p.m. GMT.

(Written by Claude Chendjou, edited by Kate Entringer)

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