Closing post
Time to wrap up….
In a note published overnight, it says
Although the Department of the Treasury, Federal Reserve and FDIC announced that all depositors of SVB and Signature Bank will be made whole, the rapid and substantial decline in bank depositor and investor confidence precipitating this action starkly highlight risks in US banks’ asset-liability management (ALM) exacerbated by rapidly rising interest rates.
Financial stocks have rallied in New York, and also in London, with US regional bank shares surging today, after heavy losses on Monday. There were losses in Asia, though, where Japanese banks fell in overnight trading.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, sums up the situation:
‘’US banking stocks are on a rollercoaster ride, rising sharply following the steep sell offs yesterday as worries seem to be lifting a little about contagion from the SVB collapse.
Hope is rebounding that the backstop of deposits of failed banks will stem further withdrawals and that more generous loan terms to struggling banks could help restore confidence. First Republic Bank shares have surged 44% but still haven’t made up the punishing losses of recent days, indicating that uncertainty remains about its robustness.
The FTSE 100 has been swept upwards in afternoon trade, helped by the tailwinds from Wall Street.
The Justice Department and the Securities and Exchange Commission are investigating the collapse of Silicon Valley Bank, the Wall Street Journal is reporting.
In the UK, MPs on the Treasury Committee are to hold a hearing into the rescue of Silicon Valley Bank UK.
German chancellor Olaf Scholz tried to reassure his citizens about the crisis, saying that Germans should not have major concerns about the fallout of Silicon Valley Bank’s collapse.
The markets rallied after US inflation fell to 6%, raising hopes that the US Federal Reserve will not feel compelled to implement a large interest rate hike this month.
Here are the rest of today’s main stories:
Updated
FTSE 100 closes 1.1% higher
With the mood in the City rather brighter today than yesterday, the FTSE 100 index has closed 88.5 points higher tonight.
The index of blue-chip shares gained 1.17% to close at 7637, recovering almost half of Monday’s losses.
Rolls-Royce (+7%), Ocado (+4.1%) and Hargreaves Lansdown (+4%) led the risers.
UK listed banks also rallied, with Barclays up 3.1% and Lloyds Banking Group gaining 2.1%.
Charles Archer of IG, warns though, that the Silicon Valley Bank crisis is “far from over”.
Across the pond, the Financial Times has reported that larger institutions such as Citi and JPMorgan are being inundated with new depositors fleeing from the thousands of smaller US banks.
For context, it’s worth remembering that while US regulators have guaranteed the deposits of funds held at Silicon Valley Bank and Signature Bank, this protection has not been extended universally.
This leaves depositors elsewhere relying on the FDIC insurance, limited to just $250,000, akin to the £85,000 FSCS limit in the UK. Over 30% of US deposits are held in small banks in the states, and more than 50% of funds are above the FDIC limit.
With new CPI figures showing that annual inflation has slowed to 6%, Federal Reserve Chair Jerome Powell has an unappetising tightrope to walk this month: pausing or pivoting could see inflation become more entrenched or start to rise just as it looked like it might finally get under control, while continuing to increase rates could well see another unexpected economic ‘break.’
Still time to make a trade on FTSE 100 bank recoveries after SVB's US collapse and UK save by HSBC.
— Charles Archer (@that_stocks_guy) March 14, 2023
My take for IG.
Obviously still risks involved, DYOR, etc.#SiliconValleyBank #SVBCollapse #hsbc #noelquinn #ftse100 #Bankcollapse #BankingCrisis https://t.co/6EiN8TwPyu
