Investors sparked a selloff in Deutsche Bank AG and thrust one of Europe’s most important lenders into the center of concerns about the health of the global financial system. Shares of Germany’s largest lender tumbled as much as 15%, their third consecutive day of losses, though they later regained some ground and closed down 8.5%. The cost to insure against its default using credit-default swaps soared to the highest levels since 2020. The concern over Deutsche Bank emerged days after Credit Suisse Group AG was forced into a takeover by its larger and more stable rival UBS Group AG . Since the collapse of Silicon Valley Bank in the U.S. earlier this month, investors have scoured the globe for institutions perceived as vulnerable. The terms of the UBS takeover of Credit Suisse engineered by Swiss regulators shook European banking markets this week, especially a provision to write down $17 billion of Credit Suisse bonds. Known as additional tier one bonds or AT1s, these instruments are an important part of European bank capital, money regulators require them to raise to protect themselves from losses. Deutsche Bank tried to ameliorate investor concerns over its debt on Friday by offering to redeem a separate type of subordinated bond, due in 2028. The offer promised to buy back the bonds at 100% of the principal, plus accrued interest, showing the bank has money to spare. Unlike Credit Suisse, Deutsche Bank is profitable and its big litigation woes are mostly behind it, analysts said. The German lender avoided losses on the meltdown of Archegos Capital Management in 2021, which spread $10 billion of losses across Wall Street, with Credit Suisse taking about half of the pain.

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The Swiss stock market ended Friday's trading session with losses. The banking sector exerted downward pressure. The index heavyweights provided stability. The SMI lost 0.8 per cent to 10,634 points. Among the 20 SMI stocks, there were 16 price losers and three price gainers; Nestle closed unchanged. 86.4 (previously: 71.56) million shares were traded. According to a media report by the Bloomberg news agency, UBS and Credit Suisse are among the banks being investigated by the US Department of Justice regarding violations of Russia sanctions. Credit Suisse shares plunged 5.2 per cent, UBS shed 3.6 per cent. As if that were not enough, Jefferies had downgraded UBS shares to "hold" from "buy" in light of the Credit Suisse takeover. Securities considered defensive held up considerably better. The Nestle share closed unchanged amid the weak market. The shares of the two pharmaceutical giants Novartis (+0.7%) and Roche (little changed) also held their ground. The three heavyweights thus saved the SMI from even greater losses. The technology group ABB had announced a further share buyback programme worth up to 1 billion US dollars after the close of trading the previous day. However, this did not help the share in the negative environment. The shares declined by 3.2 per cent.

The European stock markets closed sharply lower on Friday as concerns about the health of Deutsche Bank reignited fears regarding the strength of the international banking system. The Stoxx Europe 600 index dropped 1.4% to 440.1 points. In Paris, the CAC 40 and SBF 120 lost 1.7% and 1.8% respectively. The DAX 40 in Frankfurt fell by 1.7% and the FTSE 100 in London slipped by 1.3%. For the week as a whole, however, the Stoxx Europe 600 index rose by 0.9%. The banking sector was under pressure on Friday. In Paris, Société Générale and BNP Paribas tumbled 6.1% and 5.3% respectively, while Crédit Agricole SA was down 2.1%. In Germany, Commerzbank dropped 5.5%. Moody's downgraded its credit rating concerning retailer Casino (16.1%) from "B3" to "Caa1", with a negative outlook. JPMorgan lowered its recommendation for the oil services company Technip Energies (-7.4%) from "overweight" to "neutral", but raised its target price from €18.70 to €20.40. Virbac (+1%) confirmed its financial goals for 2023, after achieving its profitability forecast in 2022. For this year, the group still anticipates a ratio of "current operating income before amortisation of assets from acquisitions" to sales of between 13% and 14% at constant exchange rates, as well as sales growth at constant exchange rates and scope of consolidation of 4% to 6%. STMicroelectronics (-3.8%) announced that its supervisory board would propose at the next general meeting the distribution of a cash dividend amounting to $0.24 per share for the 2022 financial year, stable compared last year.

A volatile week on Wall Street ended with major stock indexes higher despite lingering fears about the health of the banking system. Bond yields fell as investors piled into Treasurys, gold traded near record highs and on Friday investors loaded up on safe-haven stocks in sectors such as utilities, healthcare and consumer staples. The S&P 500 gained 22.27 points, or 0.6%, to close at 3970.99 on Friday, while the Dow Jones Industrial Average added 132.28 points, or 0.4%, to end at 32237.53. The Nasdaq Composite increased 36.56 points, or 0.3%, to 11823.96. For the week, the S&P 500 gained 1.4%, the Dow rose 1.2% and the Nasdaq index climbed 1.7%. Shares of financial firms were mixed Friday with big U.S. institutions and European banks falling while several regional banks continued to recover from the recent selloff. In the U.S., JPMorgan lost $1.93, or 1.5%, to end at $124.91 while Morgan Stanley dropped $1.89, or 2.2% to $83.95. Regional banks rose, paced by KeyCorp, up 59 cents, or 5.2%, to $11.86. Shares of Activision Blizzard led the S&P 500 higher, ending $4.71, or 5.9%, higher at $84.39, after the U.K.’s antitrust regulator said it has narrowed its probe of Microsoft Corp.’s planned $75 billion takeover of the videogame maker, bringing the deal closer to approval. Microsoft added $2.91, or 1%, to end at $280.57. Utility stocks in the index collectively rose 3.1%, and were followed by other sectors typically deemed as safer bets, such as real estate—up 2.6%— and consumer staples, which climbed 1.6%.

Asian stocks were mixed at the start of the week. In Tokyo, the Nikkei index rose by 0.4 per cent to 27,502 points, while in Seoul the Kospi hardly moved. The Chinese stock markets experienced losses, especially in Shanghai, where the index fell by 1.1 per cent. Meituan is down 6 per cent in Hong Kong. The online delivery and retail services provider reported a loss for 2022. Fourth-quarter sales disappointed for electronics manufacturer Xiaomi (-3.9 per cent). In Seoul, financial services firms Kakaobank (-4.8%) and Kakaopay (-4.7%) are under pressure amid simmering concerns about banks. LG Energy Solution climb 3.5 per cent. The manufacturer of batteries for electric vehicles has announced plans to build a battery plant in Arizona for 5.6 billion dollars.

Two- and 10-year U.S. Treasury yields slipped on Friday, posting weekly declines, as investors focused on fresh signs of stress in the financial sector. The 10-year Treasury note fell by 10 basis points to 3.37%. The 2-year Treasury note gave up 4 basis points to 3.769%. Meanwhile, one policy maker, St. Louis Fed President James Bullard, remarked lower yields may offset some of the negative fallout from the banking sector. The Swiss bond market edged higher on Friday, too. Of the 12 Confederates traded, 2 were declining and 10 were rising. The yield of two-year Confederation bonds was last quoted at 1.018% and those of the ten-year bonds at 1.168%.

Jefferies lowers UBS to Hold (Buy) - Target CHF 20 (24)

Warburg raises target Zur Rose to CHF 80 (66) - Buy

Jefferies cuts Credit Suisse target to CHF 0.89 (2.60) - Hold - Trader

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