Bank Shares Rebound On SVB Sale

Bank shares rallied to lead stock markets higher on Monday as fears of a sector crisis eased after a regional US lender took over most of collapsed rival Silicon Valley Bank

London, (UrduPoint / Pakistan Point News - 27th Mar, 2023 ):Bank shares rallied to lead stock markets higher on Monday as fears of a sector crisis eased after a regional US lender took over most of collapsed rival Silicon Valley Bank.

The rebound followed a rout in bank shares on Friday over concerns that the turmoil in the sector now threatened German giant Deutsche Bank.

Wall Street opened higher on Monday, with the Dow rising 0.8 percent.

Shares of North Carolina-based First Citizens Bank surged more than 40 percent after US regulators announced that it was taking over much of SVB's business.

Shares in other US regional lenders surged, including those of San Francisco-based First Republic Bank, whose troubles have triggered efforts by Wall Street giants including JPMorgan Chase to rescue it.

In European trading, Frankfurt climbed 1.4 percent, with shares in troubled Deutsche Bank surging more than four percent after diving by 8.5 percent on Friday.

London and Paris stock marketss also rose, with British lender Barclays up three percent and French peer BNP Paribas gaining 2.4 percent.

- 'Anxiety to remain' - The US Federal Deposit Insurance Corporation (FDIC) announced late Sunday that First Citizens agreed to buy the deposits and loans of SVB, whose collapse this month had sparked fears of a global contagion.

The news helped "lift sentiment across the banking sector after a rocky end to last week, though the pall of banking stress still hangs over the market", said analyst Neil Wilson at trading firm Finalto.

The IMF also injected a note of caution.

International Monetary Fund chief Kristalina Georgieva on Sunday warned that risks to financial stability had increased -- and stressed "the need for vigilance" following the turmoil.

Concerns over Deutsche Bank rocked markets last Friday, particularly after contagion fears led to the Swiss government-engineered takeover of troubled Credit Suisse by domestic rival UBS.

"Anxiety is going to remain until we have a few weeks of calm and despite the small frenzy on Friday, I think we can say that the first of those is now behind us," said Craig Erlam, senior market analyst at OANDA trading platform.

The turmoil prompted US President Joe Biden, German Chancellor Olaf Scholz and other European officials to try and calm investors about the sector.

- 'No bank is immune' - Clifford Bennett, chief economist at ACY Securities, said it was unlikely the German government would allow Deutsche Bank to collapse or face restructuring but it showed the growing pressure on the banking system.

"No bank is immune in the current climate. The forces that lead to the crisis so far seen, of higher rates and depositor uncertainty, only continue to grow," he wrote in a note.

Deutsche Bank returned to financial health last year following a major restructuring after years of problems, but its shares sank last week after the cost of insuring against the bank defaulting on its debt spiked.

Markets had rallied earlier last week after authorities took measures to shore up the banking sector, but sentiment soured by Friday after a raft of central bank rate hikes in the United States and Europe.

SVB's collapses has been linked to higher rates which brought down the value of its bond portfolio.

In Asia on Monday, Hong Kong and Shanghai stocks fell, while Tokyo, Sydney and Singapore rose.

- Key figures around 1430 GMT - London - FTSE 100: UP 1.1 percent at 7,484.38 points Frankfurt - DAX: UP 1.4 percent at 15,165.98 Paris - CAC 40: UP 1.1 percent at 7,091.64 EURO STOXX 50: UP 1.0 percent at 4,172.61 New York - Dow: UP 0.8 percent at 32,495.19 Tokyo - Nikkei 225: UP 0.3 percent at 27,476.87 (close) Hong Kong - Hang Seng Index: DOWN 1.8 percent at 19,567.69 (close) Shanghai - Composite: DOWN 0.5 percent at 3,248.97 (close) Euro/dollar: UP at $1.0795 from $1.0760 on Friday Pound/dollar: UP at $1.2259 from $1.2233 Euro/pound: UP at 88.03 pence from 87.95 pence Dollar/yen: DOWN at 131.61 yen from 130.73 yenBrent North Sea crude: UP 1.7 percent at $76.28 per barrelWest Texas Intermediate: UP 2.0 percent at $70.63 per barrel