- Asian bank shares extended declines.
- As investors fear recent bankruptcies, major US banks lost $90bn in stock market value on Monday.
- Major Australian banks ANZ, Westpac and NAB fell more than 2%.
Shockwaves from the collapse of Silicon Valley Bank (SVB) further hurt bank stocks worldwide on Tuesday. Even assurances from President Joe Biden and other policymakers failed to calm markets and prompted a rethink of the outlook for interest rates.
Biden’s efforts to reassure markets and depositors came after emergency measures in the US to support banks by giving them access to additional funding failed to ease investor concerns about possible contagion to other lenders worldwide. Asian bank shares extended declines, with major Australian banks ANZ, Westpac and NAB all down more than 2%, and Japan’s bank sub-index fell 6.7% in early trading to its lowest level since December.
A run-up in interest rate expectations also sent ripples through markets, with investors betting the Federal Reserve will be reluctant to hike next week.
“Even if the collapse of several mid-tier banks doesn’t turn into a full-blown systemic crisis, it will more likely trigger a credit crunch,” said Paul Ashworth, chief North American economist at Capital Economics.
Traders see a 50% chance of no interest rate hike at this meeting, with interest rate cuts expected in the second half of the year. Earlier last week, a 25 basis point hike was fully expected, and the odds of a 50 basis point hike were 70%.
With investors fearing further bankruptcies, major US banks lost about $90bn in stock market value on Monday, bringing losses over the past three trading sessions to nearly $190bn.
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