LGT Navigator

Markets start week mixed on rekindled bank fears

Equity markets started the week mixed after worries surrounding the stability of the financial sector were evident on trading floors on Friday again. Both US Treasury Secretary Janet Yellen’s support for deposit protection and European Central Bank President Christine Lagarde’s reassurance about the strength of Europe’s financial sector fell on def ears late last week. The turmoil – which started with the collapse of three US banks – spilled over once again to Europe with Deutsche Bank shares falling as much as double digits during Friday’s trading session.

Alessandro Fezzi, LGT
Reading time
5 minutes
US banks
© Shutterstock

While broader equity indices were able to pare losses Friday, banks led stock market losses Friday with the Stoxx Europe 600 Index losing 1.4% as the financial sector fears moved towards European markets. Deutsche Bank traded down as much as 15% during Friday’s session to end the day with an 8.5% loss. The drop in Deutsche Bank’s share price was largely attributed to nervousness within the financial sector in general, as traders struggled to identify a reason for the sizeable drop in share price. UBS also came under renewed pressure, ending the day down 3.6% in Swiss trading. The loss came after a report from Bloomberg News that both UBS and Credit Suisse – which UBS agreed to take over in a government-brokered deal – are part of a US Department of Justice probe into Russian oligarchs evading sanctions.

The European Central Bank, Federal Reserve, Swiss National Bank and Bank of England all raised rates in the last two weeks despite the ongoing banking turmoil. This signalled to some investors that central banks may be fixated on higher rates to tame stubbornly high inflation, even at the cost of destabilising the financial system.

In New York, broader stock indices were nevertheless able to make small gains on Friday. The Dow Jones Industrial ended the day up 0.4% at 32’237.53 points despite starting the day with losses. The S&P 500 also gained 0.6% to finish at 3970.99 points. On the Nasdaq, the major tech indices gained about 0.3%.

Markets in Asia kicked off the new week with mixed results. Hong Kong’s Hang Seng Index led losses, falling 1.7% and the Hang Seng Tech Index fell 2.9% as well. In mainland China, the Shanghai Composite dropped 0.6% and the Shenzhen Component was down 0.2%. Japan’s Nikkei was trading up 0.4%.

Looking beyond the financial sector volatility, Purchasing Managers’ Indices (PMI) released Friday in the US and Europe painted a brighter picture for the economy than the stock market would suggest. The composite index in the US rose 3.2 points to 53.3, indicating expansion. In the euro area, the composite index reached a 10-month high at 54.1 points.

Corporate news in focus: No major corporate news scheduled for Monday.

Economic data in focus: Germany’s Ifo Business Climate Index (09:00 CET) and Bank of England Governor Andrew Bailey speaks at London School of Economics (18:00 CET).

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

Contact us