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 around three percent. Most recently, the index was 3.4 percent lower at 14,899 points.
There is no doubt that the shock from the USA is having an impact. The collapse of the SVB in the US is raising concerns of further collapses around the world. 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.
The Silicon Valley Bank in Frankfurt is a banking partner of German companies such as Hellofresh and Lilium. The Bafin measures are about a ban on sale and payment. In addition, the German SVB has to close the bank for dealings with customers.
The US government had previously announced that all deposits with the money house in the United States 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.
The question is whether that will be enough to restore public confidence in the American banking system. After all, the situation on the markets still looked robust until a few days ago – despite the interest rate hike 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.
Unrealized losses?
Accordingly, the focus in Germany is once again on bank stocks. On Friday, some of these crashed massively on both sides of the Atlantic – which 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.
Credit Suisse prices are rising
The Credit Suisse case also shows how great the uncertainty in the European banking sector is: the price for hedging against payment defaults for Credit Suisse bonds climbed to a record high on Monday.
Five-year credit default swaps (CDS) on the big bank’s debt securities rose to 451 basis points, data from S&P Market Intelligence showed. This means that an investor has to pay 451,000 euros to insure bonds worth 10 million euros. That is a multiple of comparable corporate bonds, for example from UBS.
In return, the Credit Suisse shares fell to a record low of CHF 2.115 at times. As trading progressed, the titles recovered somewhat and cost 2.18 francs. Compared to the closing level on Friday, this still corresponds to a minus of around 13 percent.
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 15 percent in trading this Monday. Most recently, the minus was about eleven percent. This makes the share the biggest daily loser in the Dax. 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 the Deutsche Bank share. The titles lose around seven percent in trading on Monday. 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 almost seven percent in the course of trading.
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 shot up last year by 27.4 percent to 6.8 billion euros. 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 more than four 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: Lufthansa shares lose up to six percent in trading. 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 four 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.
synlab: According to information from the news agency Bloomberg, the main shareholder of the laboratory chain is considering taking the company from the stock market again, barely two years after the IPO. After the corona test boom subsided, the company is struggling with declining sales. Since then, the shares have lost more than 70 percent. In the hands of an owner, the company can be restructured in peace, reported people familiar with the matter. Synlab shares temporarily jumped 29 percent on Monday.
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.