The US government takes the field and announces a plan to prevent the failure of Silicon Valley Bank from turning into a new Lehman Brothers. The Treasury, the Fdic and the Fed announce – in a joint statement – that all deposits with Svb will be available from today, therefore also those above $250,000 insured by the Federal Deposit Insurance Corp. In addition, the central bank provides a new window of liquidity to help banks respond to customer requests in the event of a flight.
But the safety net set up by the USA around the Svb case did not prevent the severe repercussion on the European stock exchanges, Milan loses 4% and sends 24 billion up in smoke. Wall Street is holding up better.
Svb, Biden: ‘No loss will be borne by taxpayers’
THE MARKETS
Wall Street bets on the Fed and goes up, despite the pronounced decline of the banks. The Dow Jones gains 0.78% to 32,159.33 points, the Nasdaq gains 1.46% to 11,300.88 points while the S&P 500 gains 0.86% to 3,893.64 points. Investors are betting on an American central bank that is more cautious in raising the cost of money after the tensions caused by Silicon Valley Bank.
Black Monday for the European stock exchanges knocked out by the bankruptcy of the Californian Silicon Valley Bank. With the fear of contagion also to the institutions of the Old Continent, moreover excluded by many quarters, 291 billion of capitalization go up in smoke. Among the individual price lists, Frankfurt drops 3.04% (Dax at 14,959 points), Paris 2.9% (Cac 40 at 7,011 points), London 2.58% (Ftse 100 7,548 points), Madrid 3 .55% (Ibex 8,955 points).
A session to forget for the overwhelmed Ftse Mib, like the rest of the European stock exchanges, from the long wave of the Californian Silicon Valley Bank crash. The blue chip index, penalized by its strong exposure to the banking sector, dropped 4.03% at 26,183 points at the close, wiping out more than 24 billion in terms of capitalisation.
What is happening to US banks
BIDEN’S INTERVENTION
“Americans can rest assured: their deposits are safe.” Joe Biden says so on the collapse of Svb and the tensions on the banking system “No losses will be borne by the taxpayers”. This was stated by Joe Biden regarding the “rapid” measures taken by the administration for the bankruptcy of Svb. The US president stresses: ‘The American banking system is safe’
GOVERNMENT BONDS
The spread between the Btp and the Bund closes up. The differential widens beyond 192 points. All government bond yields in the Eurozone are down, with investors recalculating what the trend in interest rates will be after the shock of the failure of the Silicon Valley Bank. The 10-year BTP drops by 13 points to 4.17%. But the most important tears are recorded on two-year government bonds, with the yield of the German Bund falling by 41 basis points and that of the French Oat by 38 while for the BTP the drop is 30 points. (HANDLE).
The Fed on the corner. The expected rise in interest rates of at least 0.50% at the next meeting on March 22 appears in the balance with the collapse of Silicon Valley Bank and the tensions on the financial system. The whole roadmap of the American central bank is shaking: the trend in swaps indicates that the most probable scenario is a pause perhaps for the whole of 2023 of the aggressive campaign to raise the cost of money. And once again there is hope of a cut in the cost of borrowing this year. In fact, the bankruptcy of Svb and Signature Bank could push the Fed to greater caution even in the face of inflation that won’t let go. The data on consumer prices is expected for tomorrow and analysts estimate a slowdown in inflation to 6% from 6.4% in January. A slowdown that in any case keeps prices well above the 2% target.
The chances of the Fed not raising interest rates at its next meeting in March are 66%. This is what emerges from the swap trend, according to CNBC reports.
Use in the field against contagion but no save Svb
TODAY THE EUROGROUP
The Eurogroup scheduled for today will also “discuss” the collapse of the American Svb. This was stated in an interview with Bloomberg TV by the president of the Eurogroup, Paschal Donohoe. “The euro area’s exposure to the American Svb” is “very limited”, explained Donohoe, underlining that in the old continent there is a very strong framework of rules in terms of supervision and crisis management.
The Ministry of Economy and Finance let it be known that Minister Giancarlo Giorgetti is closely following developments in the events linked to the Silicon Valley Bank and the decisions taken by the American monetary authorities. And he explains that “the Italian and European banking system is regularly monitored by the supervisory and supervisory authorities, thus ensuring its stability”.
“We appreciate the promptness with which the American authorities have intervened – writes the MEF – and we trust that, if necessary, the European authorities will also intervene with the same promptness, also assessing the implications for the conduct of monetary policy and for financial stability”.
France’s finance minister, Bruno le Maire, sees no risk of contagion for the country’s banks since the collapse of SVB given that the sector “is solid”. Speaking to France Info, the minister explained that “what happened in the United States is unique, with a bank that is exclusively exposed to the technology sector”. “There is no specific alarm for the French banking sector, we are certainly following the story closely,” he added.
The German finance ministry is also monitoring the situation together with the Bafin (supervisory body that corresponds to Consob in Germany) and the Bundesbank.
Source: Ansa
I am a journalist who writes about economics and business. I have worked in the news industry for over 5 years, most recently as an author at Global Happenings. My work has focused on covering the economy news, and I have written extensively on topics such as unemployment rates, housing prices, and the financial crisis. I am also an avid reader and have been known to write about books that interest me.
