FTSE 100 index falls 3.8%, worst since Ukraine invasion
The UK stock market has suffered its biggest drop in over a year, as the City is gripped by fears that the banking crisis will trigger a recession.
The blue-chip FTSE 100 index has closed down almost 293 points at 7,344 points, down 3.8% today.
That’s the biggest one-day drop since February 24, 2022, the day of the full-scale invasion of Ukraine.
Finance group Caution fell 12%, followed by mining companies Glencore (-10.7%) and Barclays bank (-9%).
Energy company BP and Shell both fell by over 8%, after the fall in crude oil prices today.
“Investors are still nervous about what might be lurking in the shadows,” said Russ Mold, investment director at OUCH clockearlier today.
He added:
“It is no wonder that investor sentiment remains cautious towards the big banks given that credit rating agency Moody’s downgraded its views on the US banking system to ‘negative.’
Investors constantly ask “who’s next?” and until there is more clarity, the sector may remain off-limits for many people.
Key events
It’s been another remarkable day in the financial markets and unfortunately it doesn’t feel like the worst is behind us.
So says Craig Erlam, senior market analyst at BREATHEwhich adds:
Fear has once again gripped the markets, worried about a repeat of previous crises – one in particular, for obvious reasons – and the consequences for the financial system and the global economy. Of course, this is natural when so little is known about the situation and what it ultimately means for the health of the rest of the system.
The lack of input from the Swiss central bank and supervisory authority on the situation at Credit Suisse has only fueled fear, Erlam adds:
We are now left in a situation where stock markets have crashed, banks around the world have been battered and everyone is wondering how bad the situation will get. The bill could be paid for more than a decade of rock-bottom interest rates and a massive quantitative easing experiment.
£75 billion wiped out UK blue-chip stocks
Today’s sell-off has wiped £75bn off the value of the FTSE 100 index, we reckon.
The US Treasury is monitoring Credit Suisse’s situation
The US Treasury Department oversees Credit Suisse situationa spokesman said on Wednesday.
The finance ministry is in touch with its global counterparts, the spokesman said, after Credit Suisse’s stock fell to record lows today after its biggest shareholder ruled out increasing his stake.
Parts in Credit Suisse has ended the day at a record low, down 24% to 1.69 Swiss francs.
FTSE 100 index falls 3.8%, worst since Ukraine invasion
The UK stock market has suffered its biggest drop in over a year, as the City is gripped by fears that the banking crisis will trigger a recession.
The blue-chip FTSE 100 index has closed down almost 293 points at 7,344 points, down 3.8% today.
That’s the biggest one-day drop since February 24, 2022, the day of the full-scale invasion of Ukraine.
Finance group Caution fell 12%, followed by mining companies Glencore (-10.7%) and Barclays bank (-9%).
Energy company BP and Shell both fell by over 8%, after the fall in crude oil prices today.
“Investors are still nervous about what might be lurking in the shadows,” said Russ Mold, investment director at OUCH clockearlier today.
He added:
“It is no wonder that investor sentiment remains cautious towards the big banks given that credit rating agency Moody’s downgraded its views on the US banking system to ‘negative.’
Investors constantly ask “who’s next?” and until there is more clarity, the sector may remain off-limits for many people.
Oil falls to 15-month low amid recession fears
Oil prices have fallen to their lowest level since December 2021, amid fears that the banking crisis will trigger a recession.
Brent oil and US crude are both down over 6% today.
Brent, the international benchmark, has fallen $5 to $72.40 a barrel, the lowest in about 15 months. After the war in Ukraine began, it rose to $139 per barrel.
“The oil market is showing concern in the recession,” said Stephen Innes, managing partner at SPI Asset Management.
“Energy traders draw direct parallels to past banking sector-driven recessions, particularly the 2008 financial crisis, which has similar overtones to the current financial turmoil and when oil tanked,” Innes added.
Full story: SVB collapse could be the start of “slow-rolling crisis”, warns BlackRock boss
Edward Helmore
The collapse of Silicon Valley Bank could just be the start of “a ‘slow-rolling crisis'” in the US financial system with “more foreclosures and closures on the way”, the CEO of the world’s largest asset manager has warned.
BlackRock CEO Larry Fink also predicted in a letter to investors and corporate executives that inflation would persist and rates would continue to rise, trends that both contributed to SVB’s collapse.
Failures in the past week of not only the California-based bank but also fellow US lenders Signature and Silvergate have sent shockwaves through global markets. Such concerns were fueled further on Wednesday when shares of Credit Suisse dropped to record low levels after the troubled Swiss lender’s biggest investor ruled out giving it more funding.
Fink described the situation as “the price of easy money” that had to be paid after the Federal Reserve’s decision to start aggressively raising interest rates. “Something else has to give as the fastest pace of rate hikes since the 1980s exposed cracks in the financial system,” he said.
Fink added that it was not yet clear which new victims of the “asset and liability mismatches” claimed SVB would find.
“It is too early to know how widespread the damage is,” Fink wrote.
“The regulatory response has so far been swift, and decisive action has helped to avoid contagion risks. But markets remain on edge.
However, other leading financial figures warned that emerging instability in the European banking sector could pose an even greater threat to global market stability.
High-profile economist Nouriel Roubini told Bloomberg news that if Credit Suisse should it collapse, it could result in a “Lehman moment” – a reference to the collapse of US investment bank Lehman Brothers in August 2007 at the start of the global financial crisis.
Credit Suisse’s share price has recovered some of its earlier losses, but is still sharply down today.
They are off 16% to 1.87 Swiss francs, on course to end the day at a record low.
FT: Credit Suisse appeals to Swiss central bank to show support
Credit Suisse has appealed to the Swiss central bank for a public show of support after its shares cratered as much as 30% this morning, the Financial Times reports.
FT says:
The request for a reassuring statement about Credit Suisse’s financial health came after its shares fell as low as SFr1.56, having previously been halted during a heavy selloff, according to three people with knowledge of the talks.
Credit Suisse also asked for a similar response from Finma, the Swiss regulator, two of the people said, but neither institution has yet decided to intervene publicly.
The unrest in the banking system and financial markets creates uncertainty in the US housing sector.
Alicia Hueychairman of The National Association of Home Builderssays builders are “very uncertain” about the economic outlook in the short to medium term.
“Even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions, they continue to report strong pent-up demand as buyers wait for interest rates to drop and turn more to the new home market due to a lack of existing inventory.
“However, given recent instability concerns in the banking system and volatility in interest rates, builders are very uncertain about the short to medium term outlook.
The latest NAHB housing market index rose 2 points to 44 in March, but remained below the 50-point mark, indicating stable sentiment.
Sky: UK boss of Silicon Valley Bank abandons exit plan after £1 HSBC bailout
The chief executive of Silicon Valley Bank’s UK arm has abandoned plans to leave the role following its £1 rescue takeover by HSBC, Sky News reports.
Erin Platts is to stay in her job after talks in the last 48 hours with Ian Stuart, CEO of HSBC UK Bank.
Sources said SVB UK’s independent directors, which include chairman Darren Pope, are also expected to remain under HSBC’s ownership.
It indicates HSBC’s plan to enable the technology-focused lender to operate with a degree of independence on an ongoing basis. More here.
Revealed: Erin Platts, CEO of Silicon Valley Bank UK, has abandoned plans to move to another role at the tech-focused lender following its £1 rescue by HSBC; Platts will remain in place after talks with HSBC chief Ian Stuart, insiders say. https://t.co/O8YOVeAOLK
— Mark Kleinman (@MarkKleinmanSky) March 15, 2023
EU finance chief: SVB’s collapse has limited impact on the EU
Mairead McGuinness, the EU finance chief, said the SVB collapse has a limited impact on the EU, where it has only a limited presence, but added that lightly regulated foreign lenders must meet stricter rules within the EU. She told the European Parliament:
Silicon Valley Bank has a very limited presence in the EU and we are in contact with the relevant regulatory authorities.
So the direct impact of these bank failures on the EU seems to be limited.
John Leiperinvestment manager at Titanium Access Managementfears that the problems in the banking sector will “ripple” across the economy.
Leiper says:
Credit Suisse shares fall today as fallout from the Silicon Valley Bank collapse continues.
We remain concerned that these ripple effects will continue to spread across the economy and maintain a defensive exposure at this time.
Leiper adds that the fall in US producer price inflation today points to a slowdown in the economy, as recent interest rate hikes begin to bite.
Here are the key business measures Jeremy Hunt outlined today in the Spring Budget:
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Changes to capital allowances worth £27bn to businesses over three years
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A £500m-a-year package supporting 20,000 R&D-intensive businesses through changes to R&D tax credits
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Reforms to tax credits for the creative sectors will ensure that theatres, orchestras, museums and galleries are protected from ongoing financial pressures
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The Medicines and Healthcare products Regulatory Agency (MHRA) will receive £10m of extra funding over two years to maximize its use of Brexit freedoms and speed up patient access to treatments. This will allow, from 2024, the MHRA to introduce new, fast-track approval systems, speeding up access to treatments already approved by trusted international partners and breakthrough technologies such as cancer vaccines and AI therapy for mental health.
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£900m in funding for an AI research resource and an exascale computer – making the UK one of a handful of countries to have one – and a commitment to a £2.5bn ten-year quantum research and innovation program through the government’s new Quantum Strategy.