European Markets Close at 2-month Lows, SVB Fallout Worries

Bridgette Randall
13 Mar, 2023
Frankfurt

European markets fell sharply after banks declined for the second day in a row in the aftermath of the sudden collapse of Silicon Valley Bank. 

Financial markets reacted negatively following the demise of three banks in less than five days and just a few days ago the Federal Reserve chairman assured investors and lawmakers that the financial system is sound. 

The rapid demise of mid-sized banks with concentrated deposit bases also raised concerns about the effectiveness of the U.S. regulatory system, auditors and bond rating agencies.  

Moreover, counterparty risks are still not known and may take a few days or even weeks before investors learn of links with European institutions. 

Investors were also on the defensive ahead of the U.S. Consumer Price index data on Tuesday and the European Central Bank's rate decision on Thursday.  

 

Indexes & Yields 

The DAX index declined 3.04% to 14,959.47, the CAC-40 index dropped 2.90% and the FTSE 100 index fell 2.6% to 7,548.63. 

The yield on 10-year German Bunds declined to 2.25%, French bonds fell to 2.79%,the UK gilts to 3.37% and the Italian bonds to 4.18%. 

The euro inched higher to $1.074, the British pound edged up to $.218 and the Swiss franc closed at 91.11 cents. 

Brent crude oil fell $2.16 to $80.15 a barrel and the Dutch TTF natural gas fell Є3.58 to Є48.88 per MWh. 

 

Europe Movers 

Banks were under pressure on the worries that the sudden and swift collapse of Silicon Valley Bank could spread to other banks in the face of the rising rate environment. 

Credit Agricole, BNP, Societe Generale, Deutsche Bank, Lloyds Banking, Standard Chartered, Barclays and NatWest fell between 2% and 4%.  

Three U.S. banks with a total of nearly $280 billion in deposits were closed down in less than a week and required  emergency lending from the U.S. Federal Reserve Bank, U.S. Treasury and the FDIC to prevent the contagion spreading to other mid-sized banks.  

SAP SE declined 2.9% to €107.22 after the German-software firm agreed to sell its majority stake in the U.S.-based Qualtrics International to Silver Lake and Canada Pension Plan Investment Board. 

Qualtrics agreed to go private after investment companies offered a total of $121.5 billion or $18.15 a share. 

SAP controlled about 61% of the company on a fully-diluted basis.  

HSBC agreed to acquire Silicon Valley Bank's UK branch for £1 after the collapse of the California-based bank following the bank run. 

HSBC agreed to pay the token amount to keep the operations running and continue to provide financial services to the start ups and young tech companies. 

Phoenix Group Holdings PLC declined 2.3% to 603.65 pence after the UK-based insurance group reported wider loss in financial year 2022. 

Net loss in the full-year 2022 expanded to £1.7 billion from £706 million in 2021 and assets under management declined to £259 billion from £301 billion in the previous year.