The earthquake triggered by the Silicon Valley Bank crisis has left the global financial landscape jittery, hinting at a future full of unpredictable consequences. At first limited to the United States, the disruption spilled over into European markets as Credit Suisse faced trading suspensions amid a broader collapse in equity markets. Analysts warn that this contagion could temper the pace of interest rate increases to avoid a wider spillover, offering a potential breather for sectors in places like Alicante that have already started delaying investment plans.
Fear of a broader financial crisis lingered as the banks involved—Silicon Valley Bank and Signature Bank—filed for bankruptcy, rattling investors. European stock markets followed suit, with Credit Suisse seeing its shares drop sharply and trading suspended. Other major lenders, including Societe Generale in France and UniCredit in Italy, faced similar pressure as the market tremors continued.
Amid the volatility in Euribor, the benchmark rate briefly dipped to have been around 3.858% before sliding toward 3.5% in a single day, only to claw back some losses and begin edging higher again in the following sessions.
This upheaval coincides with a scheduled European Central Bank decision on rate hikes aimed at tackling inflation. The plan, set to advance by a substantial 50 basis points, is now under scrutiny as markets reflect on the recent turmoil and its potential impact on inflation paths.
Economist José Carlos Díez, professor of Microeconomics and International Finance at the University of Alcalá de Henares and chief executive of Global Economic Analysis, noted that markets signal a pause or at least a step back in rate hikes to convey calm and prevent financial instability. He suggested waiting a reasonable period, perhaps a month, to assess whether markets stabilize before resuming the fight against inflation. (Source attribution: José Carlos Díez, economist and analyst.)
Regarding Spain, Díez emphasized that Silicon Valley Bank is a highly private institution with limited European exposure and deposits not comparable to those in Spain. Spanish banks, by contrast, feature broader diversification and are protected by a guarantee fund, which provides a layer of security for savers and lenders alike.
Bank tensions bring ECB rate hikes to a crossroads
Ignacio Jiménez Raneda, former rector of the University of Alicante and professor emeritus of Economic Analysis, echoed the sentiment that the current path of rate increases could risk spreading trouble to other banks. He suggested a temporary halt or a measured slowdown in hikes, noting that inflation policies yield medium-term results even if the pace slows down in the near term.
Francisco Menargues, president of the Alicante College of Economists, also urged restraint to prevent contagion. He cautioned that while a full-blown crisis like 2008 seems unlikely, prudent action remains essential to safeguard financial stability.
Industry
If the ECB addresses market worries by restricting further rate hikes, the Alicante region would likely welcome the move. Luis Rodríguez, head of the State Federation of Metal Entrepreneurs (Fempa), explained that higher borrowing costs squeeze profits and curb investment, prompting many companies to delay decisions.
Marián Cano, president of the Valencian Footwear Entrepreneurs Association (Avecal), noted that higher rates land amid the repayment of ICO loans, creating a bottleneck and raising concerns for some firms. Pepe Serna, head of the Valencia Community Textile Entrepreneurs Association (Ateval), agreed, pointing to the increased cost of credit that slows projects.
24,000 million losses in the Spanish stock market
Uncertainty returned to the fore as the Credit Suisse crisis joined forces with the earlier turmoil surrounding Silicon Valley Bank. In a span of four trading sessions, the Spanish equity market saw losses that approached 24 billion euros in market capitalization for Ibex-listed banks. In the midweek session, Sabadell, BBVA, Bankinter, Santander, CaixaBank, and Unicaja all traded lower, while other European lenders also declined. The downgrade extended to major global indices, with the S&P 500 and Nasdaq retreating and European banks like BNP Paribas, ING, Société Générale, Deutsche Bank, and Unicredit posting notable declines. Wall Street followed the global drift with declines at the opening.