It’s been a relatively calm start to the week, with investors seemingly relieved that the weekend brought no fresh turmoil in the banking sector.
Deutsche Bank under pressure
That was clearly the fear going into it on Friday, with Deutsche Bank being hit particularly hard amid concerns it could be next in the firing line even if the fundamentals didn’t necessarily back that up.
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. That isn’t to say that I think the storm has passed, just that the panic of the last few weeks may subside and allow for a more rational market to re-emerge. Or perhaps I’m being too hopeful for a Monday.
The authorities were once again hard at work over the weekend trying to clean up the mess of the last few weeks. This weekend it was a large portion of SVB that was sold to First Citizens Bank, with the FDIC retaining the remaining securities and other assets.
The important thing is that the various institutions in the US and Europe continue to display the ability to rapidly and decisively deal with the fallout from the recent turbulence and contain it before it worsens. That includes regaining the confidence of the markets which has been shaken.
While nerves are evident, there’s no doubt that the response so far has prevented the situation from becoming much worse and confidence will gradually improve as long as no other banks fall into difficulties. That’s obviously a big if at this point.
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