US banking crisis dogs markets

Wednesday, 15 March 2023 00:02 - - {{hitsCtrl.values.hits}}

LONDON, AFP: Stock markets sank further in Asia and faltered in Europe on Tuesday, with banks sliding again on contagion fear after the collapse of two regional US lenders.

The dollar firmed before key US inflation data, having tumbled Monday on concern the Federal Reserve could be forced to cut rates to halt markets turmoil.

The sudden failure of Silicon Valley Bank (SVB) on Friday, followed by Signature Bank two days later, sparked heavy market losses worldwide on fears of a domino effect that could heighten recession risks.

Asian equities tanked Tuesday after Wall Street suffered another punishing selloff, particularly for midsized banks First Republic, KeyCorp and Zions Bancorp.

Oil prices tumbled further with traders concerned about the demand outlook caused by a possible recession.

Europe's markets flickered between losses and gains as the morning progressed, with gloomy news from banking giant Credit Suisse grabbing traders' attention.

Shares in the scandal-hit Swiss bank dived another 5% in Zurich, having struck a record low the previous day.

Credit Suisse acknowledged 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.

The rest of Europe's banking sector continued to languish in the red.

Shares in French lender Credit Agricole dived 1.2% and rival Societe Generale lost 1.1%.

Germany's Commerzbank dropped 0.4% and Deutsche Bank shed 0.6%.

In London, HSBC fell 1.3% one day after it bought SVB's UK division for a nominal 1 ($ 1.2).

The fast-moving crisis has forced US authorities to immediately 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.