Frankfurt After the bankruptcy of the Silicon Valley Bank (SVB), the German stock market slipped significantly into the red: the Dax fell below the 15,000 point mark on Monday. At the end of trading, the leading German index was three percent lower at 14,959 points.
There is no doubt that the shock from the USA is having an effect. The collapse of the SVB is fueling concern around the world about further difficulties in the financial sector. It is the largest bank collapse since the global financial crisis of 2008.
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 must stop customer traffic.
In the US, President Joe Biden called on Congress and regulators to tighten regulation of financial institutions so that such a bank collapse would not happen again in the future. “Americans can be confident that the banking system is safe. Your money will be there when you need it,” he said in a short-term statement on Monday.
On Wall Street, however, US banks continued their descent, the papers of some smaller financial institutions collapsed by more than 50 percent. The First Republic Bank stocks fell more than 75 percent at the top.
Unrealized losses?
In Germany, too, investors are wondering how great the risk of contagion is through the failure of the Silicon Valley Bank. “German banks are now being targeted by sellers because start-up financier SVB Financial has revealed something that could concern them too: unrealized losses in the bond portfolio,” said analyst Jochen Stanzl of broker CMC Markets. Commerzbank shares fell by up to 16 percent and closed almost 13 percent in the red, Deutsche Bank lost almost five percent by the end of trading.
“The overnight rescue operations bring back bad memories of the 2008 financial crisis,” added analyst Stanzl. 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 premiums for credit default insurance at record high
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.
US bank collapse makes Dax investors nervous
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.
More reports on the consequences of the SVB bankruptcy:
In return, the Credit Suisse shares fell to a record low of CHF 2.115 at times. In the evening, the titles cost 2.27 francs – a drop of around nine percent.
Away from the state of bank stocks, investors are looking to this week’s upcoming events. US inflation for February will be released tomorrow, Tuesday. And on Thursday, 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 16 percent in trading this Monday. At the close of trading, the minus is 12.7 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 almost five percent by the end 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 lost 5.8 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 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 – the share loses 3.9 percent.
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 fell by 5.7 percent. Air traffic came to an almost complete standstill at several German airports on Monday. The reason was warning strikes in several areas.
SAP: The share of the software group SAP loses around three percent. 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: Almost two years after the stock market debut, the major shareholder Cinven is considering taking Synlab, Europe’s largest laboratory service provider, off the stock exchange again. The financial investor has expressed interest in acquiring 100 percent of the shares, explained Synlab. However, the statement is not legally binding and it is not yet clear whether the financial investor will make a public offer to all shareholders.
Cinven already holds 43 percent of the SDax-listed company. Synlab named ten euros per share as a possible price. On Monday, Synlab shares rose by more than 34 percent to EUR 9.47.
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.