European markets spooked by US bank shares sell-off
An overnight sell-off of US banking stocks, sparked by troubles at the tech-focused lender Silicon Valley Bank (SVB), has seeped into European markets and sent the FTSE 100 down almost 2% on Friday.
Investors were spooked by news that California-based SVB, which primarily lends to tech startups, had launched an emergency share sale to shore up cash after revealing it had lost $1.8bn (£1.5bn) when it sold a portfolio of bonds in response to a decline in customer deposits.
SVB’s US-listed shares plunged 60% but the rout also spread to other Wall Street stocks.
The plunge in banking sector share prices was prompted by investors worried about the wider impact that the recent increase in interest rates would have on the value of other banks’ portfolios of bonds, which tend to fall in price when interest rates rise. There were concerns about how that could affect lenders’ capital levels, which are meant to offset riskier parts of banks’ balance sheets.
The jitters sent the shares of Wells Fargo and Bank of America down 6.2% overnight, while JP Morgan dropped 5.4% and Citigroup fell 4%.
Concerns also seeped into European markets, including London’s FTSE 100, which was dragged down by some of the biggest UK-listed lenders, including Barclays, which fell 6%, as well as NatWest, Lloyds Banking Group and Standard Chartered, which were all down about 4%.
“An earthquake in Silicon Valley led to aftershock on Wall Street and the tremors could still be felt in London on Friday morning,” the AJ Bell investment director, Russ Mould, said.
“In a heavily interconnected banking industry it’s not so easy to compartmentalise these sorts of events, which often hint at vulnerabilities in the wider system. The fact SVB’s share placing has been
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