The Europe bank stocks came under pressure again as Credit Suisse tumbled to a new low on Wednesday. Read to know more.
Credit Suisse dips to a new low
Europe’s bank stocks came under pressure on Wednesday with the recent hit to Credit Suisse. Investors are worrying about stress in the banking sector with the events surrounding the collapse of Silicon Valley Bank. The Swiss lender experienced an 18 percent drop leading to a low in the European banking index. Additionally, the rapid increase in interest rates is making it harder for some businesses to pay back loans from the banks.
Across the coast in the US, the focus on the possibility of tighter bank regulations is on the rise. The collapse of SVB and Signature Bank triggered the market to topple. “We have instilled some stability, but I honestly don’t know if it is stability or the appearance of stability, because I certainly do not know what is occurring behind the scenes at the deposit base of several thousand small to medium-sized banks across the United States,” stated John Briggs. Briggs is the global head of economics and market strategy at NatWest Markets.
More on the issue
In addition to increasing the chance of loss, the dip in Credit Suisse also rises the possibility of a recession. European Central Bank (ECB) policymakers are leaning towards a rate hike of a half percent as of Thursday. As per a Reuters report, they expect inflation to remain high in the upcoming years. However, investors are starting to doubt the ECB’s commitment to a big rate hike. The collapse of Silicon Valley Bank is causing shockwaves across different markets.
While the bruised US banking stocks regained ground on Tuesday, investors are hoping a wider crisis is averted. The SVB’s shutdown and the collapse of Signature Bank forced President Biden to assure the safety of the financial system. “A mixed set of signals leave the Fed more cautious about its next steps and focused on limiting financial contagion,” stated Stéphane Monier. Monier is the chief investment officer for Lombard Odier.