London Daily

Focus on the big picture.

Markets still uncertain after SVB and Credit Suisse shocks

Markets still uncertain after SVB and Credit Suisse shocks

Concerns abound as the FTSE is on course to be down in the week overall and questions swirl around strategically important banks rescuing First Republic Bank.
A tumultuous week in the markets ended on an uncertain note - suggesting fears remain after large losses from the collapse of Silicon Valley Bank.

The FTSE 100 (Financial Times Stock Exchange) index of the most valued companies on the London Stock Exchange started the day at around the 7,500 mark - better than all of Thursday and most of Wednesday and a 1% increase - but the early morning gains had worn off by the close.

The most widely followed index of European stocks, the STOXX 600, had similar results and started the day up 0.8%, also better than Thursday and most of Wednesday, but lost all gains by end of day.

It followed the close on Thursday night of Asian markets, including Tokyo's Nikkei and China's Shanghai Composite, in positive territory.

The activity came after a group of 11 major banks provided $30bn (£24.7bn) of cash in an effort to end the crisis of confidence around First Republic, a regional US lender.

The bank has seen its share price collapse about 75% amid sector-wide balance sheet scrutiny following the collapse of Silicon Valley Bank (SVB) last Friday.

That collapse brought about a turbulent start to the week as the FTSE 100 was dragged down 2.2%, more than last Friday's 1.7% fall from when SVB news came through.

But the move did not reassure markets, as on Friday afternoon there was a more than 20% fall in share value.

Credit Suisse concerns

On top of the Silicon Valley Bank collapse, the troubles of Credit Suisse also led to investor jitters this week.

Credit Suisse, Switzerland's second-largest bank, has now been hit by a US investors lawsuit, over accusations the bank concealed its troubles.

It announced on Wednesday it had found "material weaknesses" in its financial reporting processes for 2021 and 2022.

Its shareholder, Saudi National Bank, said it would not provide any further financial assistance causing the value of the bank to fall by 30%.

The Swiss central bank stepped in to provide funding of 50bn Swiss francs (£44.5bn), which was welcomed by Chancellor Jeremy Hunt.

Now the bank is being sued by US investors who claim the lender made "materially false and misleading statements" in its 2021 annual report.

'We are not out of the woods'

Analysts have cautioned the difficulties are not over.

"We are not out of the woods," the chief market analyst at financial services company Finalto said.

The FTSE 100 is on course to be 3% down in the week overall and there is concern over the involvement of large banks in supporting First Republic Bank (FRB).

"Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy," billionaire investor Bill Ackman said.

"The [strategically important banks] would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be backstopped if it failed.

"The market has responded to this fictional vote of confidence with a 35% after-market decline in FRB stock."
Newsletter

Related Articles

London Daily
0:00
0:00
Close
Public Uptake of AI Tools Remains Limited
New Tax Rules on Second Homes in the UK to Address Housing Crisis
Can Europe Transition to a War Economy?
France Implements Stricter Airbnb Regulations
Upcoming Pandemic Inevitable, Warns Former UK Chief Scientific Advisor
British Tourists Assaulted by Bouncers in Pattaya, Thailand
Facebook Delays Removal of Fake Account Exploiting TikTok Star
Billionaire Non-Domicile Flees UK Amid Tax Law Changes
Theresa May Admits Mistakes Over Immigration Policies
Nicki Minaj's Manchester Concert Canceled After Amsterdam Arrest
UK Conservative Party Proposes Mandatory National Service at 18
Kate Middleton's Public Absence Throughout 2024
Asylum Seekers Arriving In UK by Sea Exceed 10,000 This Year
UK Criticizes ICJ Order on Israel's Rafah Assault
Ukraine's Fight Against Corruption Gains Ground Amid War
Czech President Petr Pavel Injured in Motorcycle Accident
Record Number of Abortions in England and Wales
Paul McCartney Honours Bruce Springsteen at Ivor Novello Awards
US and UK to Reject ICJ Ruling on Israel's Rafah Offensive
World Court Orders Immediate Halt to Israeli Offensive in Gaza
Understanding FLiRT COVID Variants and Their Impact
Baltic NATO Members to Construct 'Drone Wall'
Global Life Expectancy Dropped By 2 Years Due To COVID-19
Macron Halts New Caledonia Voting Reform After Riots
Rishi Sunak Shelves Rwanda and Smoking Policies Ahead of Election
US Refuses World Court Jurisdiction
China Conducts Surprise Military Drills Around Taiwan
Grim Polls Predict Major Loss for PM Rishi Sunak
Rishi Sunak's Campaign for UK Election: Key Issues Highlighted
German Property Crisis Worsens as Foreign Investment Declines
Princess of Wales's Taskforce Calls for Business Investment in Early Childhood
Campaign Groups Condemn UK Report on Protests
Former Royal Marine Charged with Espionage Found Dead
Australian PM Calls for Julian Assange's Freedom
ICC Seeks Arrest Warrants for Israeli and Hamas Leaders
UK's Infected Blood Scandal: Conclusion Nears After Seven Years
Julian Assange Granted Right to Challenge US Extradition
Congo Army Thwarts Attempted Coup Involving Americans and a British Citizen
Ireland's Homeless Gain Voting Rights
Blinken orders crackdown on Israel-Hamas leaks
Julian Assange Faces US Extradition: Key Facts
Jacob Zuma Takes Campaign to ANC Stronghold Soweto
Attempted Assassination of Slovakia PM Robert Fico: Investigation Ongoing
What Happens If an Iranian President Dies in Office?
Spain Recalls Ambassador After Argentina President's Remarks
Rishi Sunak Faces Cabinet Backlash Over Proposed Changes to Foreign Student Visas
Rwanda Denies Entry to Human Rights Researcher
Iranian President Ebrahim Raisi Reportedly Killed in Helicopter Crash
Blue Origin Resumes Space Tourism with 90-Year-Old Ed Dwight
Rishi Sunak and Wife Akshata Murty Wealthier Than King Charles
×