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Tuesday, March 21, 2023

Global stocks tumble in run on key Silicon Valley bank

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Global stocks hit two-month lows this Friday, March 10, while investors they got rid of bank papers for fear of contagion after a capital increase in the Silicon Valley Bankwith the figures of the US payrolls also in the spotlight ahead of the Federal Reserve meeting later this month.

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almost all global stock exchanges reflected losses of up to 4.5%. London fell 1.7%, Frankfurt 1.3%, Madrid 1.5%, Milan 1.6% and Paris 1.3%.

The situation of SVB and its takeover by the authorities this Friday, was stronger than the feeling that the Federal Reserve (Fed, central bank) will proceed to a rate increase less important than the one estimated in the middle of this week, when it meets on March 21 and 22.

On Wall Street, the Dow Jones lost 1.1%, the tech-heavy Nasdaq 1.8% and the broad S&P500 index 1.5%.

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On Thursday, the Silicon Valley Bank tried to reassure customers in the technology sector, since its shares plummeted 60% while trying raise funds to plug a $1.8 billion hole caused by the sale from a portfolio of bonds deficit.

The hole was uncovered with the presentation of its balance, which reflected a sharp drop in deposits. After this became known, investors chose to withdraw and the bank’s capitalization closed a third below what it was handling days ago.

The international banking system is strongly interrelated, which caused fear to break out in the sector and the indices that group the large banks underwent falls of up to 6% with recognized firms such as Bank of America, Wells Fargo, JP Morgan and Citigroup that reflected falls at those levels, figures that they had not faced since the pandemic.

The news added to the nervousness caused by the closure of Silvergate, a cryptocurrency-focused lender.

Patrick Spencerby RW Baird, said that this is one more sign of how Rising borrowing costs and the end of cheap money are influencing markets. “We are taking advantage of panic-induced selling and revaluing some regional banks,” he said.

Source: Ambito

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