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UK and European markets calm but warning of ‘slow motion’ problem to come

The UK and European stock market have mostly calmed down after a chaotic Friday and the rumblings of the worst financial crisis since 2008.

Deutsche Bank, Germany’s largest bank, was made the focal of the latest wave in selling across financial stocks and banking in the wake of Credit Suisse forced takeover.

Its shares fell more than 14% during a turbulent day of trading across Europe. They bounced back on Monday to close 6.2% higher, but they failed to reach EUR9.32 (PS7.59), which was the same level as Thursday’s drop.

The FTSE 100 index, which tracks the most valuable companies on the Financial Times Stock Exchange, closed 0.9% higher, but was still struggling to recover from Friday’s shock.


Banking shares rose after the announcement that Silicon Valley Bank was being bought by First Citizen Bank. Before closing, the purchaser witnessed its share price rise throughout the day.

Meanwhile, NatWest, Lloyds and HSBC all finished the day in positive territory with Barclays rising 2.3%

These gains are just days after the International Monetary Fund’s (IMF) head warned that there were risks to financial stability due to the turmoil in the bank sector.

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Kristalina Georgieva (managing director of IMF) stated that in a time when debt levels are higher, the rapid transition between a prolonged period with low interest rates and much higher rates, necessary for fighting inflation, invariably generates stress and vulnerabilities.

Globally, central banks have increased interest rate to lower inflation increasing banks’ profitability and creating challenges when reliable banking securities lose their value.

The three major stock market gauges rose at the opening of US markets – the S&P 500 and Nasdaq 100 were all up since Friday.

Since SVB’s collapse, markets have been volatile. Signature Bank was also bankrupt.

The Credit Suisse, in trouble, was rescued a little over a week later.

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“Markets opened calmly this morning and it seems like Friday’s panic about Deutsche Bank was a little misplaced,” stated the chief market analyst of IG Group, an online trading platform.

Chris Beauchamp stated that “the steady drain of deposits by banks means a slow-motion problem is in the making and could lead to a contraction in lending which leads to a recession.” This is a greater risk than last week’s hunt for the next domino in the global banking system.


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