Bermuda Post

Thursday, Jun 01, 2023

Deutsche Bank share slide reignites worries among investors

Deutsche Bank share slide reignites worries among investors

Sharp declines in banking shares in Europe have renewed concerns the panic triggered by the collapse of two US banks and rushed takeover of Swiss giant Credit Suisse may not be easily contained.

Shares in Germany's Deutsche Bank fell by 14% at one point on Friday, with other lenders also seeing big losses.

London's FTSE 100 ended the day down 1.3%, while stock markets in Germany and France dropped even more sharply.

But US fears did not materialise.

After falling early in the day, the Dow Jones Industrial Average gained 0.4% and the S&P 500 rose almost 0.6%, while the Nasdaq ended 0.3% higher.

The rise came despite declines in shares of big banks such as JPMorgan Chase and Morgan Stanley.

In Europe, the banks hit by a sell-off from worried investors included Germany's Commerzbank, which saw shares fall about 5%. France's Societe Generale ended down about 6% while in the UK, Standard Chartered was the biggest faller, down more than 6%.

Deutsche recovered from its steepest losses but still closed more than 8% lower.

Russ Mould, investment director at AJ Bell, told the BBC the drop in Deutsche Bank's share price, and a sharp jump in the cost of insuring against a possible default by the bank, was "indicative of a wider loss of confidence in the banking sector".

"There's a gathering fear that central banks may have overdone it with interest rate increases, having left them too low for too long," he said.

Central banks slashed interest rates during the 2008 global financial crisis and again when the pandemic hit in 2020 as part of efforts to encourage economic growth.

But over the past year or so authorities have been raising rates sharply to try to tame soaring price increases.

These rate rises have hit the value of investments that banks keep some of their money in, and contributed to the bank failures in the US.

Share prices have fallen across the sector, as high-profile investors warn the collapses are symptoms of deeper problems in the system, with other pockets of distress yet to emerge.

Higher interest rates have also raised the possibility of recession, Mr Mould said, and if that happens, "banks will generally find it pretty hard going".

The collapse of Silicon Valley Bank helped to trigger the recent loss of confidence


Central banks and governments have been trying to calm market worries.

German Chancellor Olaf Scholz defended Deutsche Bank at a news conference on Friday, noting that it had "thoroughly reorganised and modernised its business model" and was "very profitable".

Bank of England governor Andrew Bailey also told the BBC that the UK banking system was "safe and sound".

But mixed messages from US authorities as to whether they were prepared to guarantee all bank deposits have led to confusion and hopes that calm had been restored to the sector appear to be have been premature.

US Treasury Secretary Janet Yellen convened an unexpected Friday meeting with regulators on financial stability, while use of an emergency lending programme for banks that the US central bank created this month has increased over the past week, the Federal Reserve reported.

Bloomberg News also reported that UBS and Credit Suisse were being investigated by the US Department of Justice into whether they had helped Russian oligarchs avoid sanctions.

Meanwhile, the financial turmoil sparked by the failures has raised uncertainty about how much higher interest rates might go.

Federal Reserve chairman Jerome Powell said this week the bank may not lift borrowing costs much more, if the banking panic continues to weigh on lending and slows economic growth.

But on Friday St. Louis Fed president James Bullard, who is not currently on the rate-setting committee, said he thought the panic would subside, leading to higher rates than the roughly 5% currently expected.

Joachim Nagel, president of Germany's Bundesbank, said still rampant inflation meant central banks should continue to raise rates.

He declined to comment on Deutsche Bank, but said market turmoil was to be expected after the failures of Silicon Valley Bank and Signature Bank in the US and the UBS takeover of Credit Suisse.

"In the weeks after such interesting events, it is often a bumpy road," he said.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

Bermuda Post
Close
0:00
0:00
America's Got Talent…
Nvidia Joins Tech Giants as First Chipmaker to Reach $1 Trillion Valuation
Drone Attack on Moscow's Wealthiest Neighborhoods Suspected to be Launched by Ukraine
Elon Musk Meets Chinese Finance Minister in Beijing
AI ‘extinction’ should be same priority as nuclear war – experts
Prominent Hacker Forum RaidForums Suffers Substantial Data Breach
Nvidia CEO Huang says firms, individuals without AI expertise will be left behind
WPP Revolutionizes Advertising with NVIDIA's AI Powerhouse
Two US Employees Fired For Chasing Robbers Out Of Store As They Broke ''Company Policy''
If you donated to BLM, you got played
Pfizer, the EU, and disappearing ink - Smoke, Mirrors, and the Billion-Dose Pfizer Vaccine Deal: EU's 'Open Secret
Actor Tom Hanks told Harvard University graduates to be superheroes in their defense of truth and American ideals, and to resist those who twist the truth for their own gain
The Sussexes' Royal Rebound: Could Harry and Meghan Markle Return to the UK?
A provocative study suggests: Left-Wing Extremism and its Unsettling Connection to Psychopathy and Narcissism
France Arrests 10 on Suspicion of Failing to Respond in Time to Migrant Drowning
Neuralink Receives FDA Approval for First-in-Human Clinical Study
Is Saudi Arabia the holiest place in the world? Ancient Hebrew Inscriptions from "The Mount Sinai Stand" Discovered in Saudi Arabia
Ukrainian Intelligence Official Admits to Assassination Attempts on Putin
WATCH THIS: democracy in Russia is so bad!
Ed Davey: It is possible for a woman to have a penis
Bernard Arnault Loses $11.2 Billion in One Day as Investors Fear Slowdown in US Growth Will Reduce Demand for Luxury Products
Russian’s Wagner Group leader: “I am not a chef, I am a butcher. Russia is in danger of a revolution like in 1917.”
TikTok Sues Montana Over Law Banning the App
Ron DeSantis Jumps Into 2024 Presidential Race, Setting Up Showdown With Trump
Steve Jobs introducing Apple's iPhone, exactly 16 years ago.
China overtakes Japan as world's top car exporter
Last Walmart in North Portland Closing Down
Banking Behemoth vs Ex-Boss: The PMorgan-Epstein Entanglement
Florida's DeSantis seeks to disqualify judge in Disney case
Talks between US House Republicans and President Biden's Democratic administration on raising the federal government's $31.4tn debt ceiling have paused
Biden Administration Eyeing High-Profile Visits to China: The Biden Administration is heating things up by looking into setting up a series of top-level visits to Beijing by top officials in the coming months
New evidence in special counsel probe may undercut Trump’s claim documents he took were automatically declassified
A French court of appeals confirmed former President Nicolas Sarkozy's three-year jail term for corruption and influence peddling
Debt Ceiling Crises Have Unleashed Political Chaos
Weibao Wang, a former software engineer at Apple, was charged with stealing trade secrets related to autonomous systems, including self-driving cars
Mobile phone giant Vodafone to cut 11,000 jobs globally over three years as new boss says its performance not good enough
Elon Musk compares George Soros to Magneto, the supervillain from the Marvel Comics series.
Warren Buffett Sells TSMC Shares Over Concerns About Taiwan's Stability
New Study Finds That Secondary Bacterial Pneumonia Is a Major Cause of Death in COVID-19 Patients Who Require Ventilator Assistance
The Prime Minister of St. Vincent and the Grenadines calls the British monarchy "an absurdity" he wants to remove in his lifetime
Remarkable video from our Fox drone team
The official tapes of Trump's deposition in the E. Jean Carroll battery (rape) and defamation case have been released.
Here is the full video that the media are purposely not sharing
King Charles III being crowned.
New York procedures cover up cold blooded first degree murder of black man by white man
Newly released video of Donald Trump’s rape trial deposition:
Video: Ukraine MP Punches Russian Representative At Global Meet
El Paso mayor has declared a state of emergency
Russia accused Ukraine of attacking the Kremlin with drones in an attempt to kill Putin
Ahead of King Charles’ coronation, British guards rehearse in the middle of the night in London
×