A powerful wave of fear, born in the troubled world of US regional banking, has crossed the Atlantic, sending European markets into a sharp and brutal retreat on Friday.
The sell-off, which is on course to be the biggest in six weeks, is being led by a bloodbath in the banking sector, as a contagion of anxiety over hidden credit stress spreads through the global financial system.
The continent-wide STOXX 600 index has dropped a steep 1.5 percent in early trading, a fall so severe that it is set to completely wipe out all of the week’s hard-won gains.
The banking bloodbath
The epicenter of the market’s pain is the banking sector. The European banks index has slid a staggering 2.4 percent, with the giants of the industry—including Deutsche Bank, Barclays, and BNP Paribas—all leading the declines.
The rout is a direct and fearful reaction to a dramatic sell-off in the United States on Thursday, where the U.S. regional banks index had plummeted 6.3 percent.
The American crisis was triggered by troubling announcements from two regional lenders that have fueled a powerful and deeply unsettling narrative of hidden and potentially widespread credit stress.
A presidential threat, a corporate surrender
This broader market crisis is being compounded by a series of dramatic, company-specific developments.
Shares in the Danish pharmaceutical giant Novo Nordisk have fallen 4.6 percent after US President Donald Trump publicly declared that the price of the company’s best-selling weight-loss drug would be lowered and that negotiations over the price changes would be “swift.”
The presidential threat has sent a chill through the healthcare sector, one of the few that had been seen as a safe haven.
Meanwhile, a long and bitter corporate battle in Spain has reached its dramatic conclusion.
The lender BBVA has seen its shares jump 7 percent after it finally admitted defeat in its 16.32 billion euro hostile takeover bid for its smaller rival, Sabadell.
In a sign of surrender, BBVA announced it would immediately resume its shareholder remuneration program, a clear signal that the fight is over. The news sent shares of the takeover target, Sabadell, down 7 percent.
For now, the market is firmly in the grip of the bears, as a crisis that began in the heart of the American banking system sends a powerful and damaging ripple across the globe.
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