Stocks fell sharply today as concerns grew over the health of the US banking sector and its impact on investor confidence.
London’s FTSE 100 slumped 0.86% or 81.5 points to a two-week low of 9,354.57, dragged down by significant losses in oil giants and major banks. Germany’s DAX slid 1.82% and France’s CAC eased 0.18%.
The selloff followed disclosures by two US regional banks of problems related to bad and fraudulent loans, raising fears of contagion and a wider market meltdown.
Zions Bancorporation disclosed a $50m loss tied to two loans from its California branch, while Western Alliance revealed it had filed a lawsuit against Cantor Group V, alleging fraud.
Russ Mould, investment director at investment platform AJ Bell, said: “While everyone has been watching the tech sector for signs of a bubble, it’s the banking sector that’s the root cause of a minor market sell-off today.”
Mould added a note of relief that “there is no evidence of any issues with the London-listed core banking names, but investors often have a knee-jerk reaction when problems appear anywhere in the sector.”
London traders are also factoring in expectations that Inflation will climb to its highest level in nearly two years.
Figures from the Office for National Statistics on Wednesday are forecast to show that prices grew by 4% in the year to September and will probably push interest rate cuts further into next year.
Huw Pill, chief economist at the Bank of England, said today that he favoured lowering borrowing costs at a “cautious pace” in order to rein in price pressures.
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