When I look across the European banking sector, the charts are disturbingly weak. After Jay Powell’s presser, one of the things he mentioned was they had six banks they were watching. He didn’t say if they were all USA or including the rest of world.
European Financials ETF top 2 holdings:
When I look through the ETF (EUFN), the chart is marginally damaged, but nothing that severe. The chart is down 13% from 3 weeks ago.
The top holding is UBS at 4% of the ETF. It is right in line with the chart above.
Zurich insurance group has only dropped 3 % in the last 3 weeks and is up 5.3% this week. Hardly a debacle.
Other popular European Financials
Deviating from the EUFN top holdings, the names in the news are different. Many of these are the systemically important names due to their size. The bank names that come to mind for me are Commerzbank out of Germany – CRZBY.
Deutsche Bank.
Barclay’s.
BNP Paribas.
Credit Agricole
Societe Generale
Intesa SanPaolo
A quick performance review since the start of year, the 1 month performance and the one week performance shows a wide range. The interesting thing is many of these banks are up on the week. So if I am thinking of a banking plunge, many of these banks are taking it all in stride. How long will it last?
Conclusion:
The bottom line is the EUFN is not weighted based on the size of the European banks and therefore not as representative with the most systemically important banks. It would be down significantly more based on the top 10 European banks. But there is some resilience so far that this all works out as a large number of banks are up on the week even in the face of the weakness on the Credit Suisse and Deutsche Bank charts.
Regards,
Greg Schnell, CMT, MFTA