Europe stocks log worst week of the year as Credit Suisse rattles sentiment

European stocks rounded off a turbulent week with a negative session on Friday, despite announcements that Credit Suisse and First Republic Bank would receive financial help designed to prevent a crisis in the banking sector.

The pan-European Stoxx 600 index closed 1.26% lower, taking losses for the week to 3.9% according to Eikon data, their worst performance since September 2022.

Banks led losses with a 2.6% fall, followed by financial services, down 2.1%.

It comes after European banking stocks recovered over the previous session, with Credit Suisse reversing Wednesday’s dramatic 24% share price dip to end the session 18.8% higher.

However, Credit Suisse shares were back on a downward slope Friday, and ended 8% lower. The stock was down 25.5% on the week after their rollercoaster of a ride, according to Eikon data, their worst weekly performance since March 13, 2020.

“Whether depositors are sufficiently reassured to stem outflows over the next few days is a key question, in our view,” said Frédérique Carrier, head of investment strategy for RBC Wealth Management, quoted by Reuters.

“While markets are relieved that the Swiss central bank stepped in, sentiment is bound to remain very fragile, particularly as investors will likely worry about the eventual economic impact of aggressive monetary policy tightening by the European Central Bank.”

In the U.S. Thursday, a group of financial institutions agreed to deposit $30 billion in First Republic Bank — which saw its share price slide over recent days — in what is meant to be a sign of confidence in the banking system.

Asia-Pacific markets closed higher Friday in response to the First Republic Bank deposit pledge, while U.S. stocks were lower Friday morning.