Respite on markets as banking stocks rally
GLOBAL stock markets rebounded following the rout triggered by the collapse of Silicon Valley Bank – even as the entire US banking sector was downgraded.
On a day of some respite for investors after the recent turmoil, regional American lenders battered by the crisis led Wall Street higher while major benchmarks in the UK and Europe also rallied.
San Francisco-based First Republic Bank surged 27pc having fallen 62pc on Monday, Western Alliance rose 14.4pc after a 47pc slide and Keycorp jumped 4pc following a 27pc slump.
Los Angeles-based PacWest soared 33.9pc but Zions Bancorp, based in Salt Lake City in Utah, closed down 3.3pc.
The rally – after global financial stocks around the world saw £385bn wiped off their value in the wake of the collapse of SVB – came despite a damning report from Moody’s.
The credit rating agency cut the outlook for the US banking system from ‘stable’ to ‘negative’ after a ‘rapid and substantial decline in bank depositor and investor confidence’.
And while UK bank stocks also bounced back, there was little respite for Credit Suisse as the troubled lender sparked fresh fears over its future after it discovered ‘material weaknesses’ in its reporting procedures for 2021 and 2022.
SVB’s collapse also caused havoc in government bond markets, with the yield on two-year US government debt suffering their biggest one-day drop since 1987 on Monday before rebounding yesterday.
The crisis has led President Biden to call for the US ‘to strengthen the rules for banks to make it less likely this kind of bank failure would happen again’.