European Markets Jumped 2% Amid Lingering Worries of Interest Rate Risks On Banks

Bridgette Randall
14 Mar, 2023
Frankfurt

European markets rebounded on Tuesday following the worst one-day loss in the previous session in 2023 on concerns of wider fallout from the collapse of Signature Bank and Silicon Valley Bank in the U.S.  

Stock indexes jumped as much as 2% and bond yields edged lower after nervous investors looked for more information on the health of the U.S. banking system. 

The swift actions from U.S. regulators and governments bailed out uninsured depositors and calmed nervous markets for now, but worries of more bank failures remained. 

Rising interest rates in the U.S. and the Euro Area are causing turmoil in the bond portfolio of banks and with every basis point increase in interest rates is going to add more losses. 

"The result is that most banks have some amount of unrealized losses on securities. The total of these unrealized losses, including securities that are available for sale or held to maturity, was about $620 billion at year-end 2022. 

Unrealized losses on securities have meaningfully reduced the reported equity capital of the banking industry," noted FDIC Chairman Martin Gruenberg in his prepared remarks on March 6 delivered at an industry conference. 

 

Indexes & Yields 

The DAX index increased 1.8% to 15,232.83, the CAC-40 index rose 1.9% to 7,141.57 and the FTSE 100 index jumped 1.2% to 7,637.11.

The yield on 10-year German Bunds inched higher to 2.42%, French bonds edged up to 2.95%, the UK gilts to 3.48% and Italian bonds to 4.27%. 

The euro edged up to $1.074, the British pound advanced to $1.217 and the Swiss franc to 91.29 cents. 

Brent crude oil fell $2.20to $78.58 a barrel and the Dutch TTF natural gas fell 9% to Є45.09 per MWh. 

 

Europe Stock Movers 

Energy explorers and refiners were among the decliners after Brent crude and natural gas prices extended losses to the fifth session in a row. 

BP Plc declined 0.5% but Shell, TotalEnergies and Repsol gained between 1% and 1.5%. 

Resource stocks were on the defensive following the decline in copper and iron ore prices by 1%. 

Glencore, Antofagasta and Anglo American fell between 1% and 3%. 

Volkswagen AG decreased 1.6% to €128.40 and the German automobile maker said it plans to invest €180 billion between 2023 and 2027 in "in the most attractive profit pools and regions, with more than two-thirds allotted for electrification and digitalization."

Total vehicle sales declined 7% to 8.3 million worldwide in 2022. 

Group revenue in the full-year 2022 increased 12% to €279 billion and earnings after-tax increased 2.6% to €15.8 billion. 

The automotive group reported an annual dividend of €8.70 per common share, an increase from €7.50 a year ago.  

Credit Suisse AG declined as much as 4.5% before closing down 0.8% to Sfr 2.24 after the troubled Swiss-lender admitted "material weaknesses" in its financial reporting processes. 

Casino Guichard Perrachon SA increased 7.3% to €8.35 after the French discount grocery chain said it plans to sell additional stake in the Brazil-based cash and carry chain Assai. 

The company plans to sell its 13% stake or 174 million shares through a secondary public offering and raise between €550 million and €600 million. 

Assicurazioni Generali SpA advanced 2.4% to €18.34 after the Italian insurance company reported record operating profit in 2022.