Dax gives way – US government announces protection of all Silicon Valley Bank deposits

Frankfurt After the bankruptcy of the Silicon Valley Bank (SVB), the German stock market slipped significantly into the red on Monday morning: The Dax fell below the 15,000 point mark in the course of trading – a minus of almost three percent.

The US government had previously announced that all deposits with the bank would be secured. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and the US deposit insurance company FDIC issued a joint statement on Sunday evening that all depositors would be fully protected and would be able to access all of their money starting Monday. A similar exemption also applies to Signature Bank in New York, which was closed by its state licensing authority on Sunday.

Will that be enough to restore public confidence in the American banking system?

There is no doubt that the shock from the USA is having an impact. The bankruptcy of the SVB in the USA is stoking fears of further collapses worldwide. It is the biggest collapse of a bank since the global financial crisis of 2008. On Friday, the leading German index Dax closed 1.3 percent lower.

Up until a few days ago, the situation on the markets still looked robust – despite the interest rate turnaround by the central banks. But now investors are wondering how great the risk of contagion from the collapse of the Silicon Valley Bank actually is.

The US deposit insurance took control of the bank on Friday after massive deposit outflows in the previous days. Silicon Valley Bank had $209 billion in assets at the end of 2022, ranking #16 in the US banking industry.

Unrealized losses?

At the start of the week, the focus in Germany is again on bank stocks. On Friday, some of them crashed massively on both sides of the Atlantic – this is partly continuing on Monday. “German banks are now also being targeted by sellers because the start-up financier SVB Financial has revealed something that could also concern them: unrealized losses in the bond portfolio,” said analyst Jochen Stanzl from broker CMC Markets.

“The overnight bailouts bring back bad memories of the 2008 financial crisis,” he adds. The US government is trying to isolate the crisis and avoid toxic contagion effects. However, it is far from certain that this will work.

Because many banks held bonds, the price of which had collapsed at an unprecedented rate. According to Stanzl, what the market now fears is an implosion in the banks’ balance sheets. The investors were now waiting for clarifications from the big financial institutions as to whether and to what extent the problems of SVB Financial also apply to them.

The business of the British subsidiary of the SVB was taken over by the major bank HSBC on Monday morning. This was announced by British Finance Minister Jeremy Hunt on Twitter. SVB UK has around 3,500 business customers, mostly in the technology sector, and has inflows of around £7.5 billion.

More reports on the consequences of the SVB bankruptcy:

Away from the situation surrounding bank stocks, investors are currently looking to the upcoming events of this week. US inflation for February will be released tomorrow, Tuesday. And on Thursday of this week, according to experts, the European Central Bank (ECB) will again fight the stubbornly high inflation in the euro area with a sharp increase in interest rates. Among economists, it is a foregone conclusion that the currency watchdogs around ECB boss Christine Lagarde will raise the key rates by half a percentage point. It would be the sixth increase in a row since the interest rate turnaround in July 2022.

Look at individual values

Commerzbank: The Commerzbank share, which recently returned to the Dax, lost up to twelve percent in trading this Monday, making it the biggest daily loser in the Dax. On Friday it closed 2.6 percent weaker. The bank had announced that it did not see any corresponding risk in relation to the turbulence surrounding SVB – investors nevertheless rejected the paper at the start of the week.

Deutsche Bank: Another minus sign for Deutsche Bank shares this Monday. The titles lose more than four percent in the course of trading. The stock closed last Friday down more than 7 percent.

Bank index: The collapse of the Silicon Valley Bank increases fears of a banking crisis among investors. The European banking index loses around four percent in the course of trading. On Friday it had slipped 3.8 percent.

Porsche: The sports car and SUV manufacturer Porsche AG has jumped in profits in 2022 thanks to higher prices. With sales increasing by 13.6 percent to 37.6 billion euros, the operating result soared by 27.4 percent to 6.8 billion euros last year. The return climbed to 18 percent from 16 percent in the previous year, as the VW subsidiary announced on Monday. Investors take profits – this means that the share falls by around three percent at times.

The parent company VW had the subsidiary from the south on the stock exchange last September and took in gross 9.1 billion euros through the listing of a quarter of the Porsche AG preferred shares. In December, Porsche was promoted to the leading index, the Dax.

Lufthansa: The Lufthansa share loses more than six percent at times. On Monday, passengers again have to be prepared for significant delays and cancellations at several airports in Germany. All-day warning strikes began at night at the airports in Hamburg, Hanover and at the capital’s Berlin-Brandenburg Airport BER. This was confirmed by spokesmen for the Verdi union

SAP: The shares of the software group SAP fell by almost three percent in trading on Monday. SAP has sold its majority stake in data analytics firm Qualtrics to financial investor Silver Lake for $7.7 billion. The Walldorf-based Dax group announced on Monday that Silver Lake and the Canadian pension fund CPPIB had acquired the 423 million Qualtrics shares held by SAP for $18.15 each.

With agency material. Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.

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