Barbados Times

Barbados, Caribbean & World News
Sunday, May 28, 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.

Newsletter

Related Articles

Barbados Times
Close
0:00
0:00
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
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
Last Walmart in North Portland Closing Down
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
King Charles III being crowned.
'Godfather Of AI' Geoffrey Hinton Quits Google To Warn Of The Tech's Dangers
A Real woman
Vermont Man Charged with Stalking After Secretly Tracking Woman with Apple AirTag
Elon Musk Statements About Tesla Autopilot Could Be 'Deepfakes,' Lawyers Claim. Judge Evette Pennypacker Does Not Understand How Far and Advanced This Technology Became
Ukraine More Prepared for Counterattack as Reinforcements Arrive
UK Prime Minister Rishi Sunak and Italian Prime Minister Giorgia Meloni Discuss Migration, Defence, and Ukraine
AT&T's Successful Test of Satellite-Based Phone Call Raises Possibility of Widespread Coverage
CNN: "Joe Biden is asking for four more years — when 74% of Americans think the country is heading the wrong way“
Turkish President Recep Tayyip Erdogan Cuts Short Live TV Interview Due to Health Issue
US Congresswoman threaten Twitter Files journalist with arrest
Pulitzer Prize-winning journalist Seymour Hersh slams New York Times' pro-government stance and treatment of sources
Enough is enough: it's time to end the war in Ukraine. While Russia may be to blame for starting it, Russia is not the one refusing to stop it
Fox News Settles their case with Dominion Voting Systems for a staggering $787.5 MILLION
AG decries scapegoating and rushed lawmaking by government
The land of the free violence
21-year-old Massachusetts Air National Guard member Jack Teixeira has been arrested for leaking classified Pentagon Documents
The Supreme Court will allow a 12-year-old transgender West Virginia girl to compete on her middle school’s girls' sports teams amid a lawsuit over a ban
Bank of America cuts short conference after outrage at Ukraine comments
Revealed: royals took more than £1bn income from controversial estates
Mitt Romney calls Trump indictment 'overreach,' says charges were 'stretched' to suit a 'political agenda'
The G-7 aims to make global crypto regulations tougher
Don’t Dismiss China’s Peacemaking Bid
China and Brazil have signed a new deal that will allow them to trade in their own currencies, bypassing the US dollar as an intermediary
Elon Musk and Others Call for Pause on A.I., Citing ‘Profound Risks to Society’
×