Banks down, fear up, again. Yesterday, we pointed out how the slide in local bank shares wasn’t just limited to Australia, as most market analysts, experts and gloomsters had been writing of late; it was part of a worldwide trend that had whacked the share prices of some of the biggest names in global finance. Overnight the pace of that whacking escalated with Deutsche Bank, the once mighty German giant, leading the way. Its shares fell 10% at one stage as it had to explain it had enough money to make coupon payments on some of its listed bonds. Deutsche Bank shares closed down 8%. Now, at just over US$21 billion, it is down more than 60% in the past year and has a fraction of the valuations of our big four.
Credit Suisse, the troubled Swiss bank, lost around 3.6% and is also worth less than our big four, despite their valuations falling by 17% to 31% in the past year. Commerzbank, another big German lender slumped 9.5%. All up, the Stoxx Europe 600 index slumped 3.6%, to the lowest level since October 16, 2014. The Stoxx banking index plunged 5.6% as fears grew about the stability of the Greek and Italian banking sectors. In the US, the sector dived sharply in early trading, but then regained some of the losses. But Visa fell 6% and Goldman Sachs lost 4% in another miserable day. Morgan Stanley lost 7% on Wall Street and is now down 38% in the past year (and worth less than our big banks). The key S&P financials index fell and is now down more than 20% for the year so far after dropping 2.6% overnight. In other words, US banks and financials are in a bear market, while the index as a whole is only down half of that. By way of contrast, the ASX 200 financials index is only down 8% so far this year — but fell sharply today, down heavily — more than 125 points, or 2.6% in the first 90 minutes of trading this morning And leading the way down, the big banks. — Glenn Dyer
Fears now gone past tech stocks. The US copped another hit to tech stocks overnight. Twitter hit an all-time low of just US$14.90 this morning, down more than 5%, ahead of its fourth-quarter results in a day’s time. Facebook shares fell more than 4% and shares of small tech stocks with businesses orientated to cloud computing and services also lost ground. Analysts pointed out that shares in the normally defensive consumer, utilities and healthcare sectors were also sold off as the key S&P 500 index hit its lowest level since April 2014 (or 22 months).
Fears about US interest rates, the volatile dollar, concerns about the banks, especially in Europe, seem to be overtaking the previous concerns about tech and net valuations. Gold leapt past US$1200 an ounce for the first time in months, but then retreated. Bond yields fell — the US hit a year low of 1.73%. The fears centre on Deutsche Bank. The cost of insuring against its collapse are now higher than in the GFC and as high as during the eurozone crisis. Nothing happened on both occasions, but the loss of confidence has surged from nowhere, for whatever reason. Could it be Greece? Because its sharemarkets are now at levels not seen since the early 1990s — even lower than its years of economic and banking crises. This is a situation definitely to watch closely. Ten years ago this month, we were just starting to see the first outbreaks of the subprime mortgage crisis as some of the big lenders and players started cutting back. But nothing as dramatic as we saw in 2007. Just a taste and a hint of the disaster that was to come. But even the US Fed had no clues, at that stage. — Glenn Dyer