European stock markets experienced a decline on Friday, coinciding with gold prices reaching a record high after reports indicated that two US regional banks had significant exposures to bad loans and alleged fraud. This news contributed to heightened concerns over credit stress in both Europe and Asia.
In London, the FTSE 100 fell by 0.9%, while Germany’s DAX decreased by 1.8%. Italy’s FTSE MIB dropped 1.5%, the Spanish Ibex was down 0.3%, and France’s CAC 40 slipped by 0.2%. Notably, the UK’s five largest listed banks collectively lost nearly £11 billion in value, with Barclays seeing the steepest decline at almost 6%.
Across the pan-European banking sector, a total of €37.4 billion (approximately £32 billion) was wiped off. Banco Sabadell and Deutsche Bank fell by 6.78% and 6% respectively. The concerns surrounding credit stress arose in the context of substantial losses on Wall Street on Thursday, where US banking stocks also dropped sharply following announcements from Zions Bancorporation and Western Alliance regarding significant loan write-offs.
As a response to market jitters, investors gravitated towards safe-haven assets, resulting in gold reaching $4,378 (£3,262) per ounce, marking a significant weekly gain. The ongoing scrutiny of the US regional banking sector has been amplified by recent bankruptcies linked to companies like First Brands, which reported liabilities in the billions amid concerns over risky financing.
Market analysts have suggested that overarching issues in lending practices could signal further challenges for the economic landscape. The VIX index, indicating market volatility, surged, highlighting heightened investor anxiety. Jamie Dimon, CEO of JP Morgan, remarked earlier in the week about potential further challenges in the sector. As these developments unfold, the implications for broader economic stability remain to be seen.
Source: https://www.theguardian.com/business/2025/oct/17/global-stock-markets-fall-and-gold-hits-record-high-amid-jitters-over-us-banks