DAX, CAC, FTSE 100 -Plummet on Weak Banking Stocks Following Credit Suisse Fallout

Key Takeaways

• European markets experience significant decline
• Banking sector loses 6%, retail industry drops 5.2%
• Credit Suisse’s shares hit another all-time low, down more than 24%

Overview

On Wednesday, European markets experienced a significant decline, mainly due to the steep fall in banking stocks following the global Silicon Valley Bank fallout.

At 11:28 GMT, Germany’s DAX is trading at 14849.58, down 383.25 or -2.52%. France’s CAC-40 is at 6922.21, down 219.36 or -3.07% and London’s FTSE-100 is trading 7468.91, down 168.20 or -2.2%.

European Banking Sector Hit Hard Led by Plunge in Credit Suisse

The banking sector sustained its losing streak, with stocks plunging 6%, while the retail industry also experienced a 5.2% decline.

Credit Suisse, which had disclosed “material weaknesses” in its reporting on Tuesday, hit the bottom of the blue-chip index.

By 10:29 a.m. London time on Wednesday, the bank’s share price had fallen by over 20%, and it announced that it would not be able to provide further financial assistance.

As a result of the sharp losses, trade for Credit Suisse, Societe Generale, and various Italian bank stocks were halted.

Credit Suisse Shares Plummet to All-Time Low

Credit Suisse’s shares hit another all-time low, down more than 24%, due to Saudi National Bank’s announcement that it cannot provide further financial assistance, saying that it’s a regulatory issue.

The trading in Credit Suisse’s shares halted several times, and the bank’s largest investor cannot provide any assistance.

Credit Suisse Chairman Axel Lehmann confirmed that the bank is working on de-risking the balance sheet. But he refused to comment on whether there will be any government assistance in the future.

Investors are still evaluating the effect of Credit Suisse’s announcement that it had found “material weaknesses” in its financial reporting processes.

The Swiss lender had a series of scandals, risk, and compliance failures. This led to customer withdrawals of more than 110 billion Swiss francs in Q4 2022.

Inditex and H&M’s Disappointing Results Drag Down European Retail Sector Shares

European shares fell on Wednesday as disappointing results and warnings from Inditex and H&M, two of the world’s largest fashion retailers, weighed down the broader retailing sector index.

Shares of Zara-owner Inditex the world’s biggest fashion retailer, fell over 3% after it flagged higher investment spending, which took the shine off a jump in 2022 sales.

H&M the world’s second-biggest fashion retailer, slid 6.0% after a smaller-than-expected increase in sales over the December to February period came as the latest sign that it is struggling to compete with Inditex.

The pessimism on the European retailers’ results overshadowed hopes of smaller interest rate hikes and cautious optimism about the U.S. banking sector.