The European stock markets ended sharply lower on Monday, penalized by the fall in banking stocks, as attempts by the authorities to reassure the market after the collapse of the US bank SVB failed to calm fears of a possible impact on the sector.

In Paris, the CAC 40 ended down 2.9% at 7,011.5 points. The British Footsie lost 2.58% and the German Dax 3.04%.

The EuroStoxx 50 index gave up 2.99%, the FTSEurofirst 300 2.28% and the Stoxx 600 2.34%.

SVB Financial Group, which operates under the name of Silicon Valley Bank (SVB), is in dire straits as a result of the accelerated rise in interest rates in the United States, and collapsed on the stock market last week after a surprise capital increase to cover a loss following the disposal of a bond portfolio.

The measures announced this weekend by the Fed to counter the threat of a withdrawal of customer deposits, including the provision of funds to banks in need, have not allayed concerns about the impact of the bankruptcy on the sector as a whole.

Nor did the comments of several eurozone officials, who dismissed or downplayed the risk of contagion to the continent's institutions, help to reassure.

A senior European Central Bank official said on Monday that eurozone banks were well-funded and more cautious than SVB, which lent mainly to tech start-ups, and New York's Signature Bank, which was also closed over the weekend.

"Supervision of medium-sized banks in Europe is stricter, particularly with regard to funding and liquidity," said Marco Troiano, director of Scope Ratings, pointing out that there has been no backtracking on post-crisis regulations in Europe, unlike in the US.

The European Finance Ministers, meeting in Brussels, and the European Commissioner for the Economy, Paolo Gentiloni, also declared that they saw no risk of contagion in the eurozone.

In France, Finance Minister Bruno Le Maire said there was no "specific alert" on the sector.

In Germany, however, the Bundesbank decided on Monday to convene a crisis meeting to assess the possible effects of the collapse of the US bank.

President Joe Biden felt that the emergency measures taken by regulators should convince Americans that the banking system was safe, while promising stricter banking regulations.

VALUES

In Europe, SVB's woes weighed particularly heavily on the banking (-5.65%), finance (-3.76%) and insurance (-3.56%) segments on Monday.

Commerzbank lost 12.7%, Société Générale 6.2%, BNP Paribas 6.8% - the CAC40's red lantern - Credit Suisse 9.5%, Sabadell 11.8% and Santander 7.3%.

HSBC was down 4.1% after announcing on Monday that it had bought its British subsidiary SVB for one pound sterling.

Analysts agree that this is unlikely to be a direct contagion in Europe, but rather a sentiment effect.

"This movement we're seeing right now is more an indication of stress than anything else," noted Piet Christiansen, chief analyst at Danske Bank.

ON WALL STREET

At the time of closing in Europe, the New York Stock Exchange was trading in the green in a session where stock trading was interrupted several times due to volatility: the Dow Jones gained 0.09%, while the Standard & Poor's 500 gained 0.25% and the Nasdaq Composite 0.91%.

US banks Morgan Stanley and J.P. Morgan were down 1.8% and 2.4% at around 1650 GMT.

CHANGES

On the foreign exchange market, the prospect of a less aggressive Fed weighed on the dollar, which gave up 0.97% against a basket of reference currencies.

The euro took advantage of the situation, climbing 0.86% to $1.0738.

The main crypto-currencies stabilized on Monday after the US authorities announced plans to limit the fallout from the SVB bankruptcy and Circle, issuer of the stablecoin USDC, declared that it would remain redeemable in dollars.

RATES

The measures announced are leading analysts to revise their rate hike forecasts downwards, starting with Goldman Sachs, which no longer expects the Fed to raise rates in March and considers the evolution of credit costs beyond this date to be uncertain.

Investors therefore flocked to safe-haven assets on Monday, pushing the yield on two-year US Treasuries, the most sensitive to changes in the rate path, down 42 basis points to 4.165%, and the yield on the two-year German Bund down 37 basis points to 2.695%.

OIL

Oil prices were also affected by fears of a new financial crisis following the collapse of SVB, although the prospect of a recovery in Chinese demand provided some support: Brent crude fell by 1.81% to $81.28 a barrel, and US light crude (West Texas Intermediate, WTI) by 1.9% to $75.22 a barrel.

TO BE CONTINUED ON TUESDAY:

Eurozone finance ministers meet in Brussels on Tuesday.

In the United States, investors will be keeping a close eye on the publication of consumer prices for February.

(Edited by Kate Entringer)

by Diana Mandia