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European stocks fall; Deutsche Bank, UBS drag banking sector lower

Published 03/24/2023, 04:59 AM
Updated 03/24/2023, 05:18 AM
© Reuters.

By Peter Nurse - European stock markets weakened Friday on concerns of slowing economic growth as the banking crisis drifts on.

At 05:00 ET (09:00 GMT), the DAX index in Germany traded 1.3% lower, the CAC 40 in France dropped 1.3% and the FTSE 100 in the U.K. fell 1.4%.

Economic data released Friday confirmed that the important German and French manufacturing sectors remained firmly in contraction territory in March, even though services showed signs of improvement.

U.K. retail sales unexpectedly rebounded by 1.2% in February from the month before, returning sales volumes to their pre-pandemic level.

That said, it’s difficult to see this improvement continuing as Europe weighs up the fallout from the forced UBS-Credit Suisse tie-up, with the banking crisis prompting fears that lending will slow, weighing on economic activity.

Strains are also showing in the U.S. banking sector as borrowing at the Federal Reserve’s discount window was a hefty $110.2 billion as of Wednesday. 

Additionally, lending from the Fed's new Bank Term Funding Program ballooned to $53.7B, while loans to foreign central banks surged to $60B.

At the same time, central banks are continuing their clamp down on inflation, with the Federal Reserve, the Bank of England and the Swiss National Bank hiking rates this week, following last week’s European Central Bank increase.  

Citigroup cut its target for the Stoxx 600 index, expecting the benchmark to end the year at 445 points — around its current level —  down from a 475-point forecast issued just last month.

“Volatility in the global banking sector should shift investors’ attention to recession risks and deteriorating fundamentals,” said Citi, in a note, expecting company earnings to contract 5% to 10% this year.

In corporate news, Deutsche Bank (ETR:DBKGn) stock fell over 8% after a sharp jump in the cost of insuring against the risk of default, while UBS (SIX:UBSG) stock fell over 6% in the aftermath of its acquisition of troubled rival Credit Suisse.

Tui (ETR:TUI1n) stock fell over 6% after the German-based tour operator launched a steeply discounted rights issue to help it repay pandemic-era government aid.

J D Wetherspoon (LON:JDW) stock rose over 7% after the U.K. pub group swung to a profit and posted higher-than-anticipated sales in its first half.

Oil prices fell Friday, ending a largely positive week on the retreat after U.S. officials expressed caution over the length of time it would take to refill the country’s Strategic Petroleum Reserve, which has fallen to a near 50-year low.

U.S. Energy Secretary Jennifer Granholm said on Thursday that it will be “difficult” to refill government oil reserves this year, undermining previous indications that the Biden administration will begin restocking if prices traded around $67 to $72 a barrel.

By 05:00 ET, U.S. crude futures traded 1.2% lower at $69.10 a barrel, while the Brent contract climbed 1.1% to $75.05. 

Both crude benchmarks are still on track for a weekly gain of about 3%-4%, recovering from their biggest weekly declines in months last week as the banking sector exacerbated worries about a possible recession.

Additionally, gold futures fell 0.4% to $1,988.95/oz, while EUR/USD traded 0.4% lower to 1.0784.

Latest comments

the chickens are running around in panic, selling their stocks to me on the cheap 💰💰💰
oil is down because banks have problems. try to find logics here especialy after fundamental bla-bla and middle east tension explanaition
Never knew a crisis could drift...poorly written and very biased article.
Thank God in the US of A the stock market liquidity are strong.....just look at growth stocks.....a simple laying off employees move gets upgraded and shares price hit the roof
Lies!!! S&P Global's flash estimate of its composite purchasing managers index for the single currency zone rose to 54.1 from 52.0 in February, clearly above the 50 threshold that indicates growth and defying analysts' expectations for a modest slowdown
Get out of the fiat dollar. Extreme counterparty risk… gold will be king. Welcome to the great reset
Stop worrying about the great reset and work on not being such a great mor... on..
Don't you have anything better to do than let someone live rent free in your head. Gold is king! Dollar is doomed.
black Friday anyone?
Folks are afraid to hold positions over weekend, because who knows which bank will be still alive on Monday or what another ignorant message comes from the demented administration. In total, “strong economy”, as propagated by this site.
LOL. The markets say you are wrongwrinf.
The all system is lie USA is making this , Biden with brain of chicken , lets f.o
Both EU and US economies are firmly in stagflation mode, while governments and obedient media thoroughly avoid telling the truth.
Well didn't you read articles like: "Why inflation is actually good for you..." Next such article will be "Why unemployment is actually good for you..." Then next article will be "Why eating less (or starving if you are in Africa) is good for you..." It's the 1% rule... only 1% of the story has to be true, 99% of consequences can be safely ignored. Everything today is relative, we're post-reason society, nothing is true and nothing is a lie, it's all just a construct. It's all in your head... you can make it better just by thinking differently about it... it's all in your head. :)
The truth is, you don't know the meaning of the word stagflation.
This is the SECOND U.S. banking crisis in the last 15 years. There's something wrong with the American banking system, it's governance, or it's bankers and institutions and the INCENTIVES that drive their business model. The last thing the world needs in a high inflationary environment is their financial being dragged into this self-inflicted whirlpool.
Not sure if FED and Tresury understand what is going on. They say they only look at data, then let an algorithm chair the FED and Tresury, at least save some cost.
The issue with US banking system is neverending agreed. If you check what any of the ppl in banks, funds, etc earn it's multimillions abd billions for each and everyone. The whole system serves the small elite and that's why all bankers and other super wealthy have been bailed out for decades. And the only one to suffer is retail.
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