Stock Markets Fall, Banking Sector Under Pressure

On European stock exchanges on Monday morning, stock prices fell, primarily in the banking sector, although U.S. authorities announced measures to support the financial system following the collapse of SVB bank.

The STOXX 600 index of leading European stocks was down 0.5 percent at 9:30 AM.

The London FTSE index slid 0.63 percent to 7,698 points, while the Frankfurt DAX weakened 0.59 percent to 15,338 points, and the Paris CAC fell 0.72 percent to 7,168 points.

Stock prices in the banking sector fell the most this morning, averaging 1.1 percent, as investors fear the consequences of the collapse of the American Silicon Valley Bank, as well as the negative impact of aggressive interest rate hikes by central banks on the balance sheets of commercial banks.

As inflation in the Eurozone continues to remain high, the European Central Bank is expected to raise key interest rates by another 0.50 percentage points this week.

Most Asian Markets Rise

On most Asian stock exchanges, stock prices rose. The MSCI index for the Asia-Pacific region, excluding Japan, was up 1.4 percent around 9:30 AM, recovering some of last week’s losses.

The Japanese Nikkei index slid 1.1 percent, while stock prices in Australia fell 0.5 percent. In South Korea, Shanghai, and Hong Kong, however, they rose between 0.6 and 1.9 percent.

Stock prices in Hong Kong rose the most this morning, mainly due to a growth in the technology sector of about 4 percent.

Shanghai stock indices also rose as investors were encouraged by Beijing’s decision not to change the leadership in the central bank and the Ministry of Finance, which guarantees continuity of the previous monetary and fiscal policy.

Fed Announces Measures to Support Banks

Support for the markets comes from a rise in U.S. futures indices of more than 1.5 percent, indicating that on Monday, stock indices on Wall Street could recover some of the losses from last week, when they fell more than 4 percent.

Investors were encouraged by measures announced by the U.S. central bank to stabilize the banking system after the collapse of Silicon Valley Bank (SVB) on Friday and Signature Bank on Sunday.

The Fed announced that SVB customers would be able to withdraw their deposits on Monday and that there was no reason to fear losing money.

The central bank also announced a new short-term financing program that should help banks if they encounter financial problems.

In this way, the Fed aims to restore investor and public confidence in the banking system, as the collapse of SVB, the largest bankruptcy of an American bank since the financial crisis of 2008, has undermined confidence in the system.

Even before this collapse, the banking sector was under pressure as investors feared that the Fed’s aggressive interest rate hikes would lead to a recession, and thus losses for banks on loans.

Fed Slowing Rate Hike Pace?

Just last week, it was expected that the Fed would raise rates by an aggressive 0.50 percentage points at the March meeting as inflation in the U.S. remains high.

However, following the collapse of SVB, many believe that rates will be raised by 0.25 percentage points, and some think that the Fed will not raise rates at all this month to wait for the banking system to stabilize and restore confidence.

“After this shock in the banking system, we no longer expect the Fed to raise rates in March. However, we have not changed our expectations that the Fed will raise rates by 0.25 percentage points in May, June, and July, and we now expect the final rate to be in the range of 5.25 to 5.50 percent,” write analysts at Goldman Sachs in their market outlook.

Crobex Follows the Decline of European Stock Indices

On the Zagreb Stock Exchange on Monday morning, Crobex indices fell, thus following the decline of European stock indices, which are under pressure due to investor concerns regarding the banking system.

The Crobex index was down 0.61 percent at 10:30 AM, at 2,257 points, while Crobex10 slid 0.54 percent to 1,290 points.

Regular trading volume amounted to about 465 thousand euros by 10:30 AM, approximately 300 thousand less than on Friday at the same time.

The highest turnover, 120 thousand euros, was achieved by the stock of Turisthotel, whose price rose 1.7 percent to 600 euros.

On Friday, the Management Board of the Croatian Financial Services Supervisory Agency (Hanfa) approved Tankerska Plovidba’s announcement of a takeover offer for Turisthotel at a price of 610.53 euros for each ordinary share of that tourism company.

With a turnover of about 88 thousand euros, the stock of Spana follows, whose price fell 1.6 percent to 48.30 euros.

The preferred stock of Adris Group achieved a turnover of about, while it decreased by 2.1 percent to 55 euros.

With a turnover of about 30 thousand euros, the stock of Zagrebačka Bank follows, whose price fell 0.4 percent to 12 euros.

This morning’s decline in Crobex follows European stock indices. The STOXX 600 index of leading European stocks was down about 2 percent at 10:30 AM.

In this context, stock prices in the European banking sector fell the most, averaging over 4 percent, as investors fear the consequences of the collapse of the American Silicon Valley Bank, as well as the negative impact of aggressive interest rate hikes by central banks on the balance sheets of commercial banks.

As inflation in the Eurozone continues to remain high, the European Central Bank is expected to raise key interest rates by another 0.50 percentage points this week.