A rebound in European stock markets is expected on Monday at the opening after the sharp drop at the end of last week linked to a new bout of fever in the banking compartment following concerns about Deutsche Bank, investors betting on possible intervention by the authorities. .
Futures contracts on indices suggest an increase of 1.12% for the CAC 40 in Paris, 1.23% for the Dax in Frankfurt, 1.05% for the FTSE 100 in London and 1.30% for the EuroStoxx 50.
Deutsche Bank slumped on the stock market by more than 14% on Friday before reducing its closing losses to 8.5% and its cost of insurance against default risk, called “credit default swap” (CDS), soared to more by 220 basis points, the highest since the end of 2018. This has led some investors to consider the first German bank to be the next Credit Suisse, the Swiss bank having been forced to merge with its competitor UBS as part of a plan emergency rescue.
“The current level of CDS for European banks is only slightly lower than it was at the height of the European financial crisis in 2013,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“If these CDS don’t normalize, it’s highly likely that the stock market will continue to suffer for several days,” he warns.
In the United States, after the setbacks of SVB and Signature Bank, withdrawals at counters and cash transfers from small banks to large ones are accelerating. Flows to the money market increased by more than $300 billion in the past month to a record $5.1 trillion. According to Bank of America, such a phenomenon was observed in 2008 and 2020 and this was accompanied by a drop in the rates of the American Federal Reserve (Fed).
Minneapolis Federal Reserve Chairman Neel Kashkari told CBS on Sunday that U.S. central bank officials are watching the current situation “very, very closely” to determine whether banking stress will lead to a credit crisis that could push the economy into recession.
Philip Jefferson, one of the governors of the Fed, must speak during the day, while Michael Barr, the vice-president of the Fed, will be heard by the Senate on “banking supervision” on Tuesday.
Investors will take notice later this week of final US gross domestic product (GDP) data for the fourth quarter and February’s PCE price index, the Fed’s preferred measure of inflation.
In today’s agenda, the main indicator concerns the business climate in Germany for the month of March, expected to decline according to the Reuters consensus.
AT WALL STREET
The New York Stock Exchange ended higher on Friday as statements from Fed officials eased investor fears of a liquidity crunch in the banking sector.
The Dow Jones Industrial Average gained 0.41%, or 132.28 points, to 32,237.53 points.
The broader S&P-500 gained 22.63 points, 0.57%, to 3,971.35 points.
The Nasdaq Composite advanced for its part by 36.56 points (0.31%) to 11,823.96 points.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index rose 0.33% to 27,476.87 points and the broader Topix gained 0.33% to 1,961.84 points.
In China, the Shanghai SSE Composite fell by 0.49% and the CSI 300 lost 0.41%.
The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) dropped 0.7%.
EXCHANGES/RATES
The dollar is stable (0.09%) against a basket of reference currencies, while the euro is trading at 1.0751 dollar (-0.07%).
Bond yields which had fallen sharply on Friday are rising. That of ten-year US Treasury bonds took about three basis points to 3.41%, and that of two years rose by 10.2 basis points, to 3.87%.
In Europe, those of the German Bund at ten years and two years advance respectively by 6.1 points, to 2.18%, and by 11.3 points, to 2.49%.
OIL
The oil market progressed slightly with the ebb of fears on the banking sector: Brent gained 0.61% to 75.45 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.69% to 69.74 dollars.
METALS
Risk appetite is weighing on gold, which fell 0.41% to 1,969.11 dollars an ounce after crossing the $2,000 mark on Friday.
(Written by Claude Chendjou, edited by Kate Entringer)
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