The share price decline of Deutsche Bank rekindles investor concern.
Sharp drops in European banking stocks have renewed fears that the panic caused by the failure of two US banks and the rushed takeover of Swiss behemoth Credit Suisse will be difficult to contain.
Deutsche Bank shares fell 14% at one point on Friday, with other lenders also suffering significant losses.
The FTSE 100 in London fell 1.3% on the day, while stock markets in Germany and France fell even more sharply.
However, the United States’ fears were unfounded.
After falling earlier in the day, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained nearly 0.6%, and the Nasdaq finished 0.3% higher.
Despite declines in major bank stocks such as JPMorgan Chase and Morgan Stanley, the index rose.
Concerned investors drove a sell-off in European banks, including Germany’s Commerzbank, whose shares fell about 5%. Societe Generale ended down about 6% in France, while Standard Chartered was the biggest faller in the UK, down more than 6%.
Despite recovering from its worst losses, Deutsche closed more than 8% lower.
According to Russ Mould, investment director at AJ Bell, the drop in Deutsche Bank’s share price, as well as a sharp increase in the cost of insuring against the bank’s possible default, was “indicative of a wider loss of confidence in the banking sector.”
“There’s a growing concern that central banks may have overdone it with interest rate hikes after keeping them too low for too long,” he said.
As part of efforts to spur economic growth, central banks cut interest rates during the 2008 global financial crisis and again when the pandemic struck in 2020.
However, over the last year or so, authorities have sharply raised interest rates in an attempt to contain soaring price increases.