06:48 ET, March 10, 2023
Global markets fall after sharp sell-off in US bank stocks
Markets in Europe and Asia fell on Friday after a sharp selloff in U.S. bank stocks, as a major tech lender said it needed to sell shares to plug a hole in the economy.
SVB Financial Group, which is partnered with nearly half of all venture-backed technology and healthcare companies in the US, was forced to raise capital after it sold part of its portfolio of US Treasuries at a loss to cover a rapid decline in the number of customer deposits.
The stock cratered 60% on Thursday, and was down 46.6% in premarket trading on Friday.
“Many banks have large portfolios of bonds and rising interest rates make these less valuable ̵[ads1]1; the SVB situation is a reminder that many institutions are sitting on large unrealized losses on their fixed income holdings,” commented Russ Mould, investment director at the UK broker. AJ Bell.
Europe’s benchmark Stoxx Europe 600 index fell 1.5% in early trade, while London’s bank-heavy FTSE 100 (UKX) index fell 1.8%.
The Stoxx Europe 600 Banks index, which tracks 42 major European banks, including those in the UK, fell by more than 4% on Friday morning. Shares in banking giant HSBC ( HSBC ) fell almost 5% Friday. Shares of Barclays (BCS) were down 3.4%, Deutsche Bank (DB) 7.4% and Italy’s Unicredit (UNCFF)3.6%.
In Asia, Hong Kong’s Hang Seng ( HSNGY ) led losses in the region, falling 3%, while China’s Shanghai and Korea’s Kospi fell 1.4% and 1% respectively.
Asian markets have also been pressured this week as China has failed to announce any major economic stimulus during its National People’s Congress.
Meanwhile, Japan’s Nikkei finished down 1.7% on Friday as the country’s central bank decided to keep its ultra-low interest rates unchanged.
US stocks fell in premarket trading. Futures on the benchmark S&P 500 (DVS) fell 0.43%, while futures on the technology-heavy Nasdaq Composite (COMP) fell 0.2%.
The losses come after US banking stocks recorded the biggest falls in almost three years on Thursday. The KBW Bank Index, which tracks 24 leading US banks, fell 7.7%, the biggest drop in nearly three years.
The sale is a major turnaround for the global banking sector, which until Thursday had had a strong share valuation since last autumn.