After news that the stocks of Deutsche Bank lost more than 8% and reassuring statements by the European Central Bank (ECB), European indices dipped while US indices moved in the opposite direction.
Due to increased investor worry over the state of banks, particularly Deutsche Bank, the market session on Friday started with strong risk aversion.
The shares of the German bank were negatively impacted, closing with losses of slightly more than 8% as a result of the negative perception of the financial industry that emerged following Silicon Valley Bank’s (SVB) failure.
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In essence, there was no news to back up these sales, and industry stock market analysts were unable to uncover any fundamental justification for these outflows.
The central bankers of the ECB sent statements to the media in an effort to calm and assure the market that there was nothing to worry about in terms of European banks and that the system's liquidity was guaranteed.
US regional bank equities were also falling, and two-year US bond yields hit post-SVB lows as treasuries were in high demand.
In other words, buying US Dollars and Yen was the result of investors’ traditional search for safe havens in the foreign exchange market. The fall of Deutsche Bank had a particularly large impact on the EUR/USD pair, which ended up losing more than 100 pips during the session.
Subsequently, after trading in the red for most of the day, US market indices ended up in positive territory. The European indices, however, closed with losses as a result of lingering concern over Deutsche Bank. The German DAX index fell 0.60% at the close.
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On Friday, gold traded at recent highs, just above $2,000 per ounce, due to low-risk sentiment. Investors frequently purchase gold as a safe haven asset, but gold was unable to move above the $2,000 per ounce mark and pulled back later in the day. Due to this, this area has now become a major resistance level that points to a double top and potential bearish divergence on the daily RSI.
Sources: Bloomberg, Reuters
