Deutsche Bank’s U.S. listed shares fell 10% in pre-market trading.
European stocks came under pro-longed pressure Friday morning as banking sector woes fail to disperse. The DAX and FTSE 100 indices each fall by more than 2% in early morning trade.
Central Banks
Investors have been assessing the global central banks latest policy and interest rate decisions announced this week.
European, U.S. and UK central banks, each hiked rates this week. The Federal Reserve, however, also hinted that its rate-hiking spree may be coming to and end soon.
Fed Chair, Jerome Powell, noted that credit conditions have tightened, which could put greater pressure on the economy. The U.S. economy is in a tricky position and in a tug-o-war between tipping the U.S. in to recession through interest rate increase to fight inflation.
Concerns over the health of the banking sector persist after the collapse of U.S. Silicon Valley Bank. Fears are now surfacing again – has the after shock ripple effect moved from the U.S. regional banks to European banks.
We have witnessed this with the recent bailout of Credit Suisse by the UBS banking giant.
We are repeatedly assured this is not ‘spreading’ – so lets hope it really is not contagious this time.
Central banks rate hikes
The Bank of England hiked its base rate by 0.25% to 4.25%. The Swiss central bank increased its benchmark interest rate by 0.50%. Both these increases followed the U.S. Federal Reserve hike of 25 basis points – bringing the U.S. rate to 4.75% – 5%.
Some question the sense of hiking rates in the shadow of this banking turmoil. Will these rate hikes curb inflation, or will they simply increase the chance of recession, especially now with the banking sector once again under pressure?
U.S. regional banks also remain under pressure.