Silicone Valley Bank’s sudden collapse continued to reverberate through the global markets on Tuesday.
In London, major bank shares stabilised, though most remain in various shades of red.
HSBC Holdings PLC (LSE:HSBA), hot off the heels of bailing out SVB UK for a quid, was down 2% in early morning trades, while Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG) were nearly 1% lower.
Barclays PLC (LSE:BARC) was half a percent down, as was tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT).
Credit Suisse is leading losses on the continent, partially due to the Swiss bank admitting it found “material weaknesses” in its internal financial reporting controls.
Asia banks sent lower
In Tokyo, the Topix Banks index got a further battering, sent 7.4% lower in its worst daily performance since the onset of the pandemic in March 2020 and down more than 11% since Friday.
The Korea Composite Stock Price Index (KOPSI) and Hong Kong’s Hang Seng index also had a dour session.
US banks to open higher
Attention now turns to the US equities market, in particular the regional banks that bore the brunt of market volatility in Monday’s session.
In this department, there appear to be signs of relief.
After having nearly two-thirds of its value wiped from the market yesterday, San Francisco-based First Republic Bank is set to open higher, with shares trading 19% up in pre-market trades.
Phoenix-based Western Alliance Bancorp, another major Monday loser having lost nearly 50%, is due to open at least 10% higher.
US regionals, however, remain on high alert.
As Susannah Streeter, head of money and markets at Hargreaves Lansdown said: “Those niggling concerns that mild recessions could be on the way have been replaced by a wall of worry about runs on smaller banks like First Republic, and the risk that larger institutions may turn more risk averse to lending amid this volatility, prompting deeper downturns.”
US large caps including Wells Fargo, JPMorgan and Citigroup are also expected to rebound slightly when New York wakes up.
Volatility is expected to persist in the lead-up to the US Federal Reserve’s interest rate decision next Monday, the contents of which have been thrown into question.
“The repricing in rate expectations has been titanic,” said analysts at ING, citing an only 50% chance of a 50 basis point rate rise from the Fed. “Volatility is likely to remain the name of the game.”