US bank stocks sell-off throws global bank shares sharply down

Bank shares down/Shutterstock Images

The US startups lender, Silicon Valley Bank, saw stocks tumble by 60 per cent yesterday and this has started to affect European banks. In a dramatic sell-off by the major banking partner in the US tech sector, bank shares have also fallen in Europe.

Europe’s banks suffer the worst day in nine months Friday after the SVB was forced to raise fresh capital after selling a package of bonds at a loss to meet depositor demands for cash.

Europe’s STOXX banking index (.SX7P) fell more than 4%, set for its biggest one-day slide since early June, with declines for most major lenders, including HSBC (HSBA.L), down 4.5%, and Deutsche Bank (DBKGn.DE), down 7.9%. Shares in Italy’s UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI) also fell sharply.

“The market is treating this as a potential contagion risk,” said Antoine Bouvet, senior rates strategist at ING in London.

“It makes sense to me that a remote probability of a U.S. banking system-wide crisis should also come with a small probability of contagion to Europe,” he said.

Already bruised, the sector could face another bout of turmoil later on Friday if U.S. employment data points to a further racheting up of interest rates.

Shares in major U.S. banks such as JPMorgan Chase & Co (JPM.N) and Citigroup (C.N) were set to fall again when Wall Street reopens.

Global borrowing costs have risen at the fastest pace in decades over the last year as the Federal Reserve lifted U.S. rates by 450 basis points from near zero, while the European Central Bank hiked the euro zone’s by 300 bps.

One person tweeted: “Remember the plan, Covid, recession, job losses, interest rates and inflation, followed by the crashing of the banks. We’re just about to hit that last stage, the banks are crashing.”

The Twitter account for the European Central Bank is currently not discussing today’s developments.

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