Futures for the North American S&P 500 index fell 1% on European stock exchanges this Friday, deepening the losses of Thursday’s session, which began after two American creditors, Western Alliance Bank and Zions Bank revealed that they were exposed to alleged fraud by borrowers. The sounding of an alarm spread nervousness in the North American capital markets and has already spread to Europe and Asia.
“The market is seeing this as a case of ‘there is no smoke without fire’, and clearly it is a huge risk move in a single day“, Craig Cameron, head of European equities at Franklin Templeton, told the Financial Times.
The Vix index, which measures the short-term volatility of US stocks, known as an indicator that measures fear on Wall Street, the large North American financial market, rose to 28.99 points, the highest level since April.
A movement that has already extended to Europe: bank shares lead the fall in the Stoxx Europe 600 index, which fell 1.5% on Friday morning. Deutsche Bank fell 6.5%, Barclays fell 6.2% and BNP Paribas fell 4%.
The Lisbon Stock Exchange also opened lower this Friday, with the PSI20 falling 1.22%, with BCP leading the losses, with a decline of 2.4%.
Concern about financial health, adding to the AI bubble
The crashes began the day before in the North American market, shortly after the announcement by Western Alliance and Zions of the risks to which they were subject: the regional banking index KBW fell 6.3%. A sign that North American investors are worried about the health of the credit markets. A concern that adds to the bankruptcy of the car credit finance company Tricolor and the automotive parts manufacturer First Brands, highlights the Financial Times.
The shock surrounding this possible fraud comes at a time when there is already tension in the financial markets given the prospect of a bubble in relation to investments in Artificial Intelligence (AI).
“When people are already worried about the AI bubble and the return of trade wars between the US and China, we can’t afford to have this kind of news“, highlighted Arun Sai, senior multi-asset strategist at Pictet Asset Management, in statements to the Financial Times. Adding: “if we add First Brands and Tricolor, investors are starting to understand a pattern”.
Even though almost two decades have passed since the financial crisis triggered by the massive granting of high-risk mortgage loans to financially fragile customers, the so-called subprime – a process that began with Fannie Mae and Freddie Mac – investors are still nervous when there is credit fraud.
Asian markets also fell on Friday, with Hong Kong’s Hang Seng index losing 2.5% and mainland China’s CSI 300 index falling 2.3%. The negative wave hit the Japanese benchmark index Topix, which lost 1%.
De-dramatizing, Emmanuel Cau, director of European equity strategy at Barclays, argued in statements to the FT that this liquidation “largely driven by concerns about credit quality”, is also, for now, “another excuse to take profits” with shares that have performed well this year.