Equity markets plunged globally, including in the UK, on concerns over the health of US banks in a tough economic climate.
Wall Street bank stocks lost $80 billion in value Thursday afternoon after two California banks ran into trouble.
First, a major cryptocurrency-focused lender called Silvergate has announced it will shut down after heavy losses related to the collapse of the FTX exchange last year.
SVB Financial Group, the parent company of startup lender Silicon Valley Bank, has announced a stock sale to bolster its balance sheet as deposits from customers struggling to raise funds are declining.
He pointed to a higher-than-expected “cash burn” and rising cost of capital.
Shares of SVB lost 70% of their market value, while shares of large US banks such as JP Morgan Chase also closed down more than 5%.
Asian and European bank stocks followed suit in Friday’s trading.
Credit Suisse shares hit a record low while Deutsche Bank fell 8%.
In London, HSBC and Standard Chartered lowered the FTSE 100 at opening and sold extensively.
All UK listed banks were down around 4-5% in early trading and the FTSE 100 Index was down more than 150 points (2%) and was in a phase of volatile trading.
RJ Grant, head of trading at Keef, Brouillette & Woods in New York, said of the spark:
“Many institutional investors are not currently happy with owning a particular bank.
“It just surprises people because Silicon Valley has historically been such a strong and well-run bank.
With the current problems, people are wondering what about other banks that are of lower quality and don’t have the reputation of Silicon Valley banks. ”
ING economist Rob Carnell said: “I think there is some speculation that there is, or could be, a bigger problem within the US banking system.”
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Investors were more broadly concerned about the impact of higher interest rates after the US Federal Reserve (Fed) chairman signaled last week that the rate hike cycle to keep inflation in check is far from over. .
It’s usually backed by bank stocks, which are holders of Treasuries and mortgage-backed securities that have been bought at rock bottom and skyrocketed due to rising interest rates.
Market experts said the broad sale of bank shares followed SVB’s $2.25 billion capital raising.
The portfolio included US Treasuries and mortgage-backed securities.
Neil Wilson, chief market analyst at markets.com, said he didn’t see the reaction as a sign of a financial crisis like Lehman Brothers.
“While the plunge in SVB shares has clearly taken a toll on sentiment, SVB is not representative of the entire US banking sector,” he noted.
https://news.sky.com/story/jitters-over-health-of-us-banks-spark-global-stock-market-sell-off-12830097 Turmoil over US bank health sparks plunge in global equity markets | Celent Business News