Bank shares fall as industry fears grow
Banking shares plummeted in Europe and Asia on Friday, as turmoil in the sector and the latest interest rate hikes raised concerns about a possible recession.
German giant Deutsche Bank appeared to take the brunt of the blow, with its shares plunging more than 13% after a significant rise in the cost of insuring its bonds against the risk of default.
In a third day of losses, Deutsche Bank shares lost a fifth of their value for the month, according to S&P Market Intelligence, a data and analysis firm.
What’s happening to bank stocks?
Indices in major European financial capitals fell more than 2% on Friday, with declines reported in Asia earlier in the day.
In recent weeks, central banks have raised interest rates in an attempt to calm markets after the collapse of the Silicon Valley Bank (SVB) in the US. They have been using the mechanism for almost a year as a way to combat rising inflation.
Recently, the European Central Bank (ECB) raised interest rates by 0.5%, while the US Federal Reserve revised its rate hike to 0.25% after fears over the banking sector prompted the Fed to reduce its aggressive interest rate policy.
The Fed has signaled it may consider halting rate hikes altogether. The ECB, however, said it was nowhere near the end of its rate hike scheme, emphasizing that the fight against inflation was still ongoing.
The latest banking crisis began when two midsize US banks – SVB and Signature Bank – failed about two weeks ago, sounding alarm bells among investors about the sector’s overall resilience. The crisis soon spread to Europe, with Swiss bank Credit Suisse falling into an emergency takeover by its main competitor, UBS.
Many fear a scenario similar to that leading up to the 2008 financial crisis. Banking and economic officials in the US and Europe stressed that the banking sector is now more robust than it was 15 years ago.
How is the crisis affecting currencies and oil?
The crisis sparked a run on the US dollar, a currency many turn to in tough times, rising 0.6% against major peers. The euro, meanwhile, fell 0.9%.
Another safe-haven currency, the Japanese yen, also rose to a six-week high, rising 0.6%.
Brent crude, the global oil benchmark, fell 2.5% to around $73 (€67) a barrel.
Source: DW
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.