European Markets Rebounded After Contagion Fears Eased

Bridgette Randall
21 Mar, 2023
Frankfurt

European market indexes rebounded on the optimism that the joint actions by major central banks following the rescue of Credit Suisse stemmed the contagion from spreading. 

Despite the rebound on Tuesday, the selloff in European banks is far from over. Interest rates in Europe are still in negative territory and not restrictive enough. 

The sustained increases in interest rates are expected to expand unrealized losses in the government bond holdings at all banks- small and large. 

Investors are questioning the health of the European banking system and worried that the banks may not have means to raise capital in the event of sharp crunch in liquidity or panic driven deposit outflows. 

At least for now, investors set aside the liquidity and deposit outflow worries and bid up bank and financial services stocks. 

The UK budget deficit jumped to a record high in the month since record keeping began in 1993, the Office for National Statistics said Tuesday. 

The public sector debt, excluding banks, increased £9.7 to £16.7 billion after the government expanded fuel subsidies to a wider group of people.   

The UK government has estimated the full-year deficit in 2023 to be around 6.1% of GDP. 

  

Indexes & Yields 

The DAX index jumped 1.8% to 15,195.34, the CAC-40 index advanced 1.4% to 7,112.91 and the FTSE 100 index increased 1.8% to 7,536.22. 

The yield on 10-year German Bunds rebounded to 2.29%, the French bonds to 2.81%, the UK gilts to 3.37% and the Italian bonds to 4.11%. 

The euro inched higher to $1.079, the British pound edged lower to $1.218 and the Swiss franc edged lower to 92.27 cents. 

Brent crude oil increased $1.58 to $75.38 a barrel and the Dutch TTF natural gas futures for immediate month delivery edged up 2.13 to 41.46 per MWh. 

 

Europe Stock Movers 

European automakers advanced after February vehicle registrations increased at a faster pace after semiconductor shortages eased. 

New passenger cars registrations in the European Union rose 11.5% to 802,763 vehicles in February, following an 11.3% increase in January.

Registrations rose in most markets in the union and Spain led the region with an increase of 19.2% followed by 17.4% in Italy. 

In the first two months of 2023, registrations in Spain jumped 32.1%, in Italy rose 18.2%, in France increased 9.1% and in Germany edged up 0.2%. 

Battery electric vehicle registrations increased 12.1% of total but petrol-fueled vehicles led with 36.9% market share.  

BMW AG increased 1.8% to €97.34, Renault SA rose 3.7% to €36.76, Stellantis NV, the parent of Fiat and Chrysler, increased 2.2% to €16.19. 

Pernod Ricard increased 0.9% to €202.40 and the French spirit and wine company said its American unit has agreed to acquire a majority stake in Skrewball, the maker of peanut butter flavored whiskey brand.   

The company is also in the middle of repurchasing €300 million of its stock between February 20 and April 6 and not to exceed the share price of €320 a share.