Security guards letting people enter the Silicon Valley Bank’s headquarters in Santa Clara, California on Monday Photograph: Benjamin Fanjoy/AP
Security guards letting people enter the Silicon Valley Bank’s headquarters in Santa Clara, California on Monday Photograph: Benjamin Fanjoy/APIntroduction: Bank share sell-off spreads to Asia as SVB collapse shakes marketsGood morning.
The collapse of Silicon Valley Bank is gripping the financial markets, as global bank shares slide despite reassurances from President Joe Biden on Monday.
There have been fresh losses in Asia-Pacific stock markets today, as bank stocks continues to fall.
Japan’s Topix Banks index is on track for its worst day since March 2020, early in the pandemic, currently down 7.4%. Mitsubishi UFJ Financial Group is down 8.66%, with Mizuho Financial Group losing 7.1%
This has pulled Japan’s Topix index down by 2.7%.
Elsewhere, Hong Kong’s Hang Seng index has dropped by 2.35%.
South Korea’s KOSPI index has lost 2.4%, with its Hana Financial Group down almost 4%. Australia’s S&P/ASX is down 1.4%.
Stephen Innes, managing partner at SPI Asset Management, says:
The collapse of Silicon Valley Bank on Friday has brought on the highest volatile market conditions of 2023 so far.
Shares in a number of America’s regional banks closed sharply lower on Monday night, hours after president Joe Biden tried to reassure depositors and investors, saying:
Americans can rest assured that our banking system is safe.
Your deposits are safe.
‘Banking system is safe’: Biden reassures markets after Silicon Valley Bank collapse – videoOn Sunday night, the Federal Reserve and Treasury boosted lenders’ access to quick cash, and guaranteed deposits at Signature Bank (which was closed down on Sunday night) and Silicon Valley Bank.
But other regional banks still came under pressure, with San Francisco-based First Republic losing 62% and Arizona-headquartered Western Alliance Bank off 47%.
On Monday, there were heavy falls on European stock markets, with the UK’s FTSE 100 index sheddding 200 points, or 2.58%, to end at 7548 points, the lowest since the start of January.
Markets are expected to open calmer today, though….
Silicon Valley Bank’s collapse last week was the largest bank failure in over a decade.
It came after SVB made a $1.8bn loss on a sale of securities, due to the drop in prices of government bond and mortgage-backed securities as interest rates have risen. That left it struggling to meet withdrawal requests from customers.
Expectations of further sharp rises in borrowing costs are being reassessed too, with central banks likely to be warier of breaking another part of the financial system.
As of Fri investors were expecting @bankofengland interest rates to peak at around 4.75% in Aug.
Following the collapse of Silicon Valley Bank and all that, they’re now expecting a peak of just 4.25%.
Things are shifting…
Below chart shows changes in expectations for AUG rates👇 pic.twitter.com/GH4svt5KcS
— Ed Conway (@EdConwaySky) March 13, 2023 Yesterday was “a wild session on Wall Street as the failure of Silicon Valley Bank revealed the unintended consequence of the Fed’s tightening cycle”, says IG analyst Tony Sycamore:
As noted in recent months and in wider financial circles, the Fed has historically continued tightening until something breaks.
While the Fed’s move to backstop uninsured deposits will likely prevent further banking runs, a potential banking crisis threat trumps high inflation any day of the week.
Reflecting this, the rates market experienced the most significant 2-day fall in U.S. treasury yields since the 1987 crash (yields are now at 4% from 5.08% last week). After being 70% priced for a 50bp rate hike last week, there is now just 12bps priced for next week’s FOMC meeting.
The agenda 7am GMT: UK unemployment report
8am GMT: European finance ministers hold an ECOFIN conference
10.15am GMT: MPs hold hearing on “Prepayment meters: warrants and forced installations”
12.30pm: US CPI inflation report for February