The sudden collapse of Silicon Valley Bank on Friday and Signature Bank two days after has continued to rattle the global banking sector and impacted the equities markets in the negative.
According to AFP, the heavy market losses worldwide on fears of a domino effect about the collapsed banks could heighten recession risks.
The Asian equities tanked Tuesday after Wall Street suffered another punishing selloff, particularly for midsized banks First Republic, KeyCorp and Zions Bancorp.
Europe’s markets flickered between losses and gains as Tuesday morning progressed, with gloomy news from banking giant Credit Suisse grabbing traders’ attention.
“There was a sense some calm had been restored to markets after a bruising few sessions. While the immediate fallout from the SVB collapse may have been contained for now, the edginess around the banking sector is not helped by the latest revelations from Credit Suisse as it identified material weaknesses in reporting controls,” said AJ Bell investment director Russ Mould.
Shares in the scandal-hit Swiss bank dived another five per cent in Zurich, having struck a record low the previous day.
Credit Suisse announced on Tuesday that it had uncovered “material weaknesses” in its internal controls over financial reporting for 2021 and 2022.
The lender revealed the news in its annual report, which was delayed following queries from US regulators regarding its books.
“Credit Suisse is always in the emergency room when it comes to any market crisis, and today’s news really intensifies the worries,” said IG analyst Chris Beauchamp.
“It’s a bank that can never seem to get its house in order.”
Meanwhile, the rest of Europe’s banking sector continued to languish in the red.
Shares in French lender Credit Agricole dived 1.2 per cent and rival Societe Generale lost 1.1 per cent. German banks; Commerzbank dropped 0.4 per cent and Deutsche Bank shed 0.6 per cent.
In London, HSBC fell 1.3 per cent one day after it bought SVB’s UK division for a nominal £1 ($1.2).
“Bank shares globally continued to feel the reverberations from the fallout from the Silicon Valley Bank issue, with general sentiment weakening as a result,” said Richard Hunter, head of markets at Interactive Investor.
The fast-moving crisis has forced US authorities to pledge support for other lenders and depositors.
Bloomberg News reported that about $465 billion had been wiped off the market value of global financial stocks in just three days.
The collapse of SVB, which specialised in venture-capital financing mainly in the tech sector, was largely the result of the Fed’s sharp interest rate hikes aimed at quelling inflation, which hit securities hard.
As of 11:15 a.m. on Tuesday, these are how the markets were doing; London – FTSE 100: DOWN 0.3 per cent at 7,522.66 points. Frankfurt – DAX: UP 0.5 per cent at 15,027.77, Paris – CAC 40: UP 0.1 per cent at 7,015.07, Zurich – SMI: DOWN 0.2 per cent at 10,613.29. EURO STOXX 50: UP 0.2 per cent at 4,104.90, Tokyo – Nikkei 225: DOWN 2.2 per cent at 27,222.04 (close). Hong Kong – Hang Seng Index: DOWN 2.3 per cent at 19,247.96 (close), Shanghai – Composite: DOWN 0.7 per cent at 3,245.31 (close), New York – Dow: DOWN 0.3 per cent at 31,819.14 (close).
