The UK stock market experienced a significant decline following warnings from two regional US banks, prompting a widespread sell-off across global share markets. Western Alliance Bank and Zions Bank disclosed issues related to bad or potentially fraudulent loans, which raised concerns about the stability of the banking sector.
In response, share prices for several major UK banks, including Barclays and Standard Chartered, fell by more than 5%. The FTSE 100 index of leading shares dropped approximately 1.5% before regaining some losses. This downward trend was mirrored by stock market indexes worldwide, such as Germany’s Dax and France’s Cac 40.
Zions Bank announced it would write off a loss of $50 million on two loans, while Western Alliance initiated a lawsuit alleging fraud. These developments have led to concerns regarding risk management and lending practices within the US regional banking sector. Investment director Russ Mould noted that while there is currently no evidence of problems with UK-listed banks, investor sentiment can be adversely affected by issues in any part of the banking sector.
European bank shares also experienced declines, with Deutsche Bank’s shares falling over 5% and Societe Generale’s shares dropping 4%. The market volatility followed the failures of two US firms, Tricolor and First Brands, casting doubt on the private credit market where loans are sourced from non-bank lenders.
Jamie Dimon, CEO of JPMorgan Chase, indicated that these recent failures could signify a broader trend of difficulties within the sector. Additionally, there are concerns that recent surges in artificial intelligence investments may have contributed to a stock market bubble, leading some to question the valuation of shares.
In light of these events, the price of gold reached a record high of $4,380 per ounce as investors sought safer investment avenues. The VIX volatility index, also known as the “Fear Index,” rose to its highest level since April, reflecting increased market anxiety.
Source: https://www.bbc.com/news/articles/c4gjz82wx4wo?at_medium=RSS&at_campaign=rss