Broker on the stock exchange in Frankfurt. Illustrative photo.
London/Frankfurt/Riyadh – European shares weakened sharply today, the impetus for their decline was the news of a massive drop in the shares of the Swiss bank Credit Suisse. The pan-European STOXX Europe 600 index fell by 2.92 percent and closed at 436.45 points. It thus recorded the most significant one-day drop in more than a year. Trading in the shares of some European banks had to be suspended during the day. European currencies are also weakening due to the collapse of Credit Suisse shares. Oil prices fell to lowest since late 2021.
In an interview with Reuters, the head of the Saudi National Bank (SNB), Amar Khodajri, said that the SNB cannot buy any more shares of Credit Suisse because of regulatory obstacles. With her share in the bank, she would get over ten percent. Credit Suisse has long-term problems, and the Saudis have so far helped it precisely by buying its shares. The SNB is the largest commercial bank in Saudi Arabia and the largest shareholder of Credit Suisse.
“We can't, because we would get above ten percent. It's a regulatory matter,” said Khudajrí about possible further purchases of the Swiss bank's shares. Refinitiv data shows the SNB holds 9.88 percent of Credit Suisse. Credit Suisse is the second largest bank in Switzerland.
Credit Suisse shares on the Zurich stock exchange were temporarily suspended before midday as their price fell more than 20 percent. Regulators subsequently temporarily suspended trading in the shares of the French bank Société Générale, which owns Komerční banka in the Czech Republic, as well as in the shares of several Italian banks, due to a sharp drop in prices, the server of financial television CNBC wrote. Shares of Credit Suisse finally closed today's trading with a loss of 24.2 percent, while Société Générale shares weakened by 12.2 percent.
Stock markets have been very volatile since the end of last week due to the collapse of US Silicon Valley financial houses Bank (SVB) and Signature Bank. The American authorities have closed them, and even though they organized support for savers over the weekend, who thus have access to their deposits, nervousness in the markets remains.
“The markets are unfettered. We are moving from the problems of the American banks towards the problems of the European banks, especially Credit Suisse,” said Carlo Franchini, who is the head of the institutional investors department at the financial institute Banca Ifigest in Milan.
The DAX index, which tracks trading on the stock exchange in Frankfurt am Main, fell by 3.27 percent today and closed at 14,735.26 points. The main index of the London Stock Exchange FTSE 100 decreased by 3.81 percent to 7,345.80 points and the main index of the Milan Stock Exchange FTSE/MIB fell even by 4.61 percent to 25,865.84 points.
European currencies weaken due to Credit Suisse shares falling
European currencies are also losing today after Credit Suisse shares fell. The euro, the British pound and the Swiss franc weaken against the US dollar.
The euro depreciated by less than two percent to USD 1.0523 around 16:50 CET. The pound fell 1.1 percent to $1.2021 against the dollar at the same time. The US currency to the Swiss franc rose 1.1 percent to CHF 0.9243. The dollar index, which tracks the dollar's performance against a basket of six major world currencies, gained 1.4 percent to 105.02 points.
Oil prices fell to the lowest since late 2021
Oil prices fell to their lowest level since the end of 2021 on global markets today, pushed down by a plunge in financial markets triggered by concerns about the situation of Credit Suisse, Switzerland's second largest bank. Brent North Sea crude fell 4.9 percent today to close at $73.69 a barrel. During the day, it reached below 72 dollars per barrel.
The price of US West Texas Intermediate (WTI) light oil fell below 66 dollars per barrel during trading. It eventually closed down 5.2 percent at $67.61 a barrel. Both Brent and WTI prices lost over four percent on Tuesday.
Still in the morning, the price of oil increased after favorable data on economic activity in China and on the demand outlook for this year, published by the International Energy Agency (IEA). But the optimistic mood in the market faded when the largest shareholder Credit Suisse said it could not provide further financial assistance to the financial house. Credit Suisse shares immediately weakened sharply, and with them the broader stock market in Europe, led by banks.
According to XTB analyst Jiří Tyleček, the markets are worried about deepening problems in the banking sector, which may affect the global economy. “The growth in demand from China, which was supposed to drive oil prices above the hundred-dollar level, has not yet materialized. The sell-off is due to the fall in the prices of risky assets. Traders are afraid that the banking crisis will affect Europe,” Tyleček told ČTK.
” Concerns about contagion are clearly gaining ground,” PVM analyst Tamas Varga told Reuters. “As a result, the dollar is stronger and stocks are weaker, and that's bad news for oil,” he added. A stronger dollar makes oil and other commodities more expensive from the perspective of holders of other currencies, which typically dampens demand.
“Credit Suisse and broader concerns about the banking sector are further undermining market sentiment,” said trader Craig Erlam of OANDA. “The outlook is suddenly very uncertain,” he added.
Oil prices in dollars per barrel (about 159 liters):
|TYPE||CONTRACT||CLOSING PRICE||PREVIOUS CLOSE|
|London – ICE||Brent||May||73.69||77.45|
|New York – NYMEX||WTI||April||67.61||71.33|