LONDON: British stocks plunged on Monday, and the pound climbed against the US dollar as the Silicon Valley Bank (SVB) collapse spooked financial markets and raised expectations that US rate hikes would slow down.
The FTSE 100 index, the leading benchmark for blue chip companies listed in the United Kingdom (UK), ended the session down 2.58 per cent, or 199.72 points, at 7,548.63. Standard Chartered and Barclays were among the worst performers.
“Despite the best efforts of governments and regulators, the market was still very edgy on Monday as investors considered the fallout from SVB’s collapse,“ said Russ Mould, investment director at the online investment platform AJ Bell.
“There’s plenty to worry about, whether it be the conflict in Ukraine, inflation, rising interest rates and now a potential banking crisis has been added to the mix. Little surprise people are feeling a bit spooked,“ Mould added.
The British pound rose to the strongest rate in weeks, trading at almost US$1.22. “The SVB collapse has hurt the US dollar, as market pricing of interest rate expectations has massively shifted,“ said market analyst Kenny Fisher from online forex trading platform and broker OANDA.
Just last week, the markets had priced a 50-basis point (bp) hike at 70 per cent, and a 25-basis point increase at 30 per cent, Fisher said. Currently, there is a 70 per cent likelihood of a 25-basis point increase, he added. “The dust hasn’t yet settled from the SVB failure so it’s understandable that the markets are jittery.”
Californian authorities on Friday closed SVB, previously the 16th largest bank in the United States. After the tech-focused lender reported huge losses from securities sales, this sparked a run on the bank's deposits.
The SVB collapse is the largest bank failure since the collapse of US savings and loan association Washington Mutual in 2008. -Bernama
