Stock markets sank on Wednesday on renewed fears of a burgeoning banking crisis, snapping a one-day rally as Credit Suisse led a rout in shares of major lenders.
Global markets have been rattled by the collapse of tech sector lenders Silicon Valley Bank and Signature, which forced US authorities to intervene at the weekend to prevent contagion.
After a rebound on Tuesday, equities fell again on Wednesday, with European indices tumbling by more than three percent and the Dow Industrial Average shedding 1.7 percent to lead a drop on Wall Street.
The euro slid while oil prices also dropped, with the main US contract WTI down more than five percent as it fell under $70 per barrel for the first time since December 2021.
“You get the picture: investors were panicking. Bloodbath, if you will,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
“Concerns over another 2008-style financial crises have intensified,” he said.
Shares of Credit Suisse, Switzerland’s second biggest bank, crashed by more than 30 percent to hit a record low.
Credit Suisse, already mired in scandals prior to the US banking upheaval, was hammered by the markets after its main shareholder, Saudi National Bank, ruled out ploughing more cash into the bank.
SVB and Signature were the biggest banking casualties since the global financial crisis of 2008, forcing US authorities to take them over and step in to guarantee customer deposits.
“The financial sector in Europe is under significant turmoil today as a result of SVB’s fallout,” noted Naeem Aslam, chief investment officer at Zaye Capital Markets.
Bank shares tumbled across Europe, with British group Barclays, Germany’s Commerzbank, France’s BNP Paribas and Societe Generale shedding between seven and 11 percent.
On Wall Street, JPMorgan Chase fell 4.7 percent, Citigroup lost 5.0 percent and embattled regional bank First Republic sank more than 17 percent.
“What began as a regional banking crisis in the US has suddenly morphed into a European one,” said IG analyst Chris Beauchamp.
The upheaval comes as the European Central Bank is poised to raise interest rates again Thursday to tackle high inflation.
But the crisis at SVB was blamed in part on high interest rates, which wrecked the value of the bank’s bond portfolio.
“Surely the ECB are not going to hike yet again just as the crisis intensifies,” Beauchamp told AFP.
The US Federal Reserve will hold its own policy meeting next week, with the fast-moving situation clouding the picture as markets panic.
“There still remains a lot of question marks with respect to how bad this is going to get,” said Adam Sarhan of 50 Park Investments.
“But for now, defense is king until we have some clarity.”
Key figures around 1400 GMT
New York – Dow: DOWN 1.7 percent at 31,618.17 points
New York – S&P 500: DOWN 1.5 percent at 3,862.24
New York – NASDAQ: DOWN 1.1 percent at 11,302.89
London – FTSE 100: DOWN 3.1 percent at 7,403.86
Frankfurt – DAX: DOWN 2.7 percent at 14,818.04
Paris – CAC 40: DOWN 3.2 percent at 6,913.21
EURO STOXX 50: DOWN 3.2 percent at 4,055.56
Tokyo – Nikkei 225: FLAT at 27,229.48 (close)
Hong Kong – Hang Seng Index: UP 1.5 percent at 19,539.87 (close)
Shanghai – Composite: UP 0.6 percent at 3,263.21 (close)
Euro/dollar: DOWN at $1.0545 from $1.0735 on Tuesday
Pound/dollar: DOWN at $1.2066 from $1.2156
Euro/pound: DOWN at 87.38 pence from 88.29 pence
Dollar/yen: DOWN at 132.91 yen from 134.20 yen
West Texas Intermediate: DOWN 5.1 percent at $67.71 per barrel
Brent North Sea crude: DOWN 4.6 percent at $73.87 per barrel
burs-lth/jj
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