Global Head of Sales Trading
Summary: Following the collapse of SVB bank in the US, European banks have come under renewed selling pressure as contagion fears grow and the EuroStoxx banks index falls by more than 8%. This article will look in more detail at what has led us to this point alongside what to look for in the price action and why Saxo as a financial institution provides both safety and security.
As the collapse of US bank SVB took place last week, authorities stepped in to contain the fallout and prevent a broader impact on the financial sector. New liquidity measures from the Federal Reserve and the announcement that both SVB and Signature Bank's depositors will be made whole were meant to shield the banking industry from contagion risks.
What we are witnessing now though is further turmoil as markets wrestle with deteriorating financial conditions and fears of contagion outside of the US banks. This is all set against the backdrop of excessively high inflation that central banks globally still need to tackle.
There’s still a lot of leverage in the system and interbank markets are seeing liquidity drying up. Volatility feeds further volatility in a similar feedback loop as we saw during the covid market turmoil and clients should ready themselves accordingly.
From a cross-asset perspective, equities and credit have held up way better than they should have during the whole hiking cycle. Financial sector valuations have especially been booming, which has left the sector vulnerable to a re-pricing. The Stoxx 600 banks have fallen 15% since the SVB story hit last week but the index is still up +23% from the end of September 2022 (as illustrated in the chart). In a way, one could even say that this was long overdue and hence needed, even though the way it is unfolding is far from optimal.
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)