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Europe Stocks Climb as Investors Hope for an End to Banking Volatility; Deutsche Bank Rallies

Bloomberg | Bloomberg | Getty Images

This is CNBC's live blog covering European markets.

European stocks were higher at the start of the new trading week, with cautious optimism returning after a sharp loss in Friday's session.

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The pan-European Stoxx 600 index was up 1% in late afternoon trade, with all sectors in the green. Construction stocks were up 1.3%, while banks rose 1.4% and financial services climbed 1.2%.

Mining stocks clawed back earlier losses to trade 0.5% higher after China's industrial profit dropped sharply year-on-year.

In the U.S. early on Monday, First Citizens Bank agreed to buy large parts of Silicon Valley Bank, the U.S. Federal Deposit Insurance Corporation said. However, investors remained on high alert for signs of stresses in the banking system, while fears of contagion remain.

The deal includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain "in receivership for disposition by the FDIC."

Last Friday, Deutsche Bank shares saw a sell-off after the German lender's credit default swaps jumped. The stock was up 5.8% on Monday.

"Bargain hunters were out in force for Europe's banks following the chaos of the past few weeks", said Russ Mould, investment director at AJ Bell, in a note.

But, he added, "many investors still don't want to touch the banking sector for fears there is more distress to come," flagging concerns over a rise in costs for banks due to the potential tightening of regulation, and more cautious bank lending having a negative impact on the economy.

Over the weekend, International Monetary Fund chief Kristalina Georgieva said in a speech that risks to financial stability have increased, though actions by advanced economies have calmed market stress.

Asia-Pacific markets were mixed as investors continue to assess the latest news from the banking sector in the U.S. and Europe. 

Meanwhile, U.S. stock futures edged higher following a winning week on Wall Street.

The French protests seem to be growing — and that wasn’t expected, economics lecturer says

Renaud Foucart, senior lecturer in economics at Lancaster University, discusses the French protests over pension reform, saying at some point demonstrators will want to return to their ordinary lives.

Still risk of mild recession in euro zone: S&P

The euro zone economy has a had a "solid start" to the year but there remains an "elevated risk of a mild recession down the road," S&P Global Ratings economists say in a new note.

The ratings agency expects headline inflation to remain above the European Central Bank's 2% target until the first quarter of 2025, and for core inflation to remain above target until the third quarter of 2025.

 "Sticky inflation will force the ECB to raise rates for longer than we previously expected, probably until the deposit facility rate reaches 3.50% by the summer, unless the market turmoil undermines the current outlook for growth and inflation," the note says.

Headline inflation was 8.5% in February.

S&P economists expect restrictive monetary policy to impact domestic demand while production and the labor market may also take a hit, though government relief measures will help consumer spending and public investment will ease the cyclical slowdown.

The euro zone economy beat expectations in the fourth quarter of 2022, recording 0.1% growth in a preliminary reading versus expectations of a 0.1% contraction.

— Jenni Reid

Saudi National Bank chair resigns after Credit Suisse comments

Saudi National Bank Chairman Ammar al-Khudairy has resigned, days after his comments contributed to the share collapse of Credit Suisse, which was ultimately sold to UBS.

He will be replaced by SNB Managing Director and Group CEO Mohammed al-Ghamdi, according to a SNB statement to the Saudi Stock Exchange.

Al-Khudairy is stepping down "due to personal reasons," the bank said.

Read the full story here.

— Ruxandra Iordache

Mining stocks fall after China’s industrial profit drops

Mining stocks were the lone sector pulling down the Stoxx 600 index in morning trade, down 0.66%.

Rio Tinto and Anglo American shares were both down around 1.5% at 10:25 a.m. in London.

China's industrial profit was down 22.9% year-on-year in the January to February period, government data showed on Monday, the steepest decline since April 2020.

Basic materials stocks fell by more than 1% in Hong Kong.

— Jenni Reid, Jihye Lee

German business sentiment rises

Business sentiment in Germany climbed for a fifth straight month in February, as measured by the Ifo Business Climate Index.

The biggest change was in manufacturing, where companies reported better satisfaction with their current situation and "pessimism almost completely disappeared from their expectations," said Ifo president Clemens Fuest.

Sentiment also improved in services and trade, though construction firms reported their current situation was worse than the previous month.

"Lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence," Carsten Brzeski, global head of macro for ING Research, said in a note.

Recent financial market volatility hasn't dented sentiment, he said, but the war in Ukraine, the energy transition and the effects of monetary policy tightening continue to cloud the picture for the German economy.

— Jenni Reid

Deutsche Bank ticks higher

Deutsche Bank shares rose Monday morning after declining in the previous three sessions, as European banks posted cautious gains.

The stock was up 3.7% in mid-morning trade after opening 6.6% higher.

The German lender spooked markets last week as its credit default swaps, a form of insurance for a company's bondholders against its default, jumped higher.

— Jenni Reid

Europe stocks open higher

European stocks rose in early trade, and were up 1% by 8:30 a.m. London time with all sectors in the green.

Banks climbed 1.7% to lead gains amid cautious optimism around the sector as construction stocks climbed by 1.1% and insurance by 1.14%.

France's CAC 40, which has brushed off political volatility at home as strikes over pension reforms rock the country, was up 1%. Germany's DAX rose 0.9%, while the U.K.'s FTSE 100 was up 0.77%.

— Jenni Reid

First Citizens to buy parts of Silicon Valley Bank

First Citizens Bank agreed to buy Silicon Valley Bank's deposits and loans, the U.S. Federal Deposit Insurance Corporation announced early Monday.

"The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023," the FDIC said in the release.

"Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First–Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations."

Read the full story here.

— Elliot Smith

Fed's Kashkari says banking stress brings U.S. closer to recession

The recent banking turmoil could bring the U.S. closer to a recession, Minneapolis Fed president Neel Kashkari said in an interview with CBS' Face The Nation.

"It definitely brings us closer right now, what's unclear for us is how much of these banking stresses are leading to a widespread credit crunch," he said when asked if the banking crisis with the mid-sized banks may have a real impact on the economy. "And then that credit crunch, just as you said, would then slow down the economy."

He said Fed officials are monitoring the impact from the fallout of the banking sector "very, very closely," and the current system has the "full support" of the Federal Reserve.

"The U.S. banking system is resilient, and it's sound," he said when asked about the stability of the banking system and its ability to control further risks seen in California and New York.

"The banking system has a strong capital position and a lot of liquidity and has the full support of the Federal Reserve and other regulators standing behind it," said Kashkari.

"I'm not saying that all of the stresses are behind us, I expect this process will take some time. But fundamentally, the banking system is sound," he said.

— Jihye Lee

CNBC Pro: Rivian shares keep hitting lows. Here's where Wall Street sees it going next.

Most electric vehicle stocks are up this year, but Rivian is one exception.

Its shares keep hitting lows recently. Is Rivian just a cash-burning company, or does Wall Street see significant upside for the stock ahead? Here's what they say.

CNBC Pro subscribers can read more here.

— Weizhen Tan

CNBC Pro: "Sell into rallies": Morgan Stanley says European banks sector "not as attractive as it was"

In the wake of the recent banking stresses, Morgan Stanley has cautioned that the European banking sector is "not as attractive as it was" last week despite recent share price drops.

Strategists at the Wall Street bank also recommend 10 defensive stocks to own right now while selling European bank stocks "into any material rally".

CNBC Pro subscribers can read more here.

— Ganesh Rao

European markets: Here are the opening calls

European markets are heading for a positive open Monday morning.

The U.K.'s FTSE 100 index is expected to open 53 points higher at 7,458, Germany's DAX 154 points higher at 15,111, France's CAC up 68 points at 7,083 and Italy's FTSE MIB 197 points higher at 26,089, according to data from IG.

Germany's Ifo survey of current economic sentiment is released Monday.

— Holly Ellyatt

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