ISLAMABAD
\nShockwaves from the collapse of Silicon Valley Bank further pounded global bank stocks on Tuesday as assurances from United States President Joe Biden and other policymakers did little to calm markets and prompted a rethink on the interest rate outlook.
\nBiden\u2019s efforts to reassure markets and depositors came after emergency U.S. measures to shore up banks by giving them access to additional funding failed to dispel investor worries about potential contagion to other lenders worldwide.
\nBanking stocks in Asia extended declines on Tuesday, with Japanese firms hit particularly hard and anxiety about systemic risk leading the wider market lower.
\n\u201cBank runs have started (and) interbank markets have become stressed,\u201d said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey. \u201cArguably, liquidity measures should have stopped these dynamics but Main Street has been watching news and queues \u2013 not financial plumbing.\u201d
\nA furious race to reprice interest rate expectations also sent waves through markets as investors bet the Federal Reserve will be reluctant to hike next week.
\nTraders currently see a 50% chance of no rate hike at that meeting, with rate cuts priced in for the second half of the year. Early last week, a 25 basis-point hike was fully priced in, with a 70% chance seen of 50 basis points.
\nAnalysts say uncertainty continues to dog the sector with investors still extremely worried about the health of smaller global banks, the prospect of tighter regulation and a preference to protect depositors at the expense of shareholders should other banks fail.
\nMajor US banks lost around $90 billion in stock market value on Monday, bringing their loss over the past three trading sessions to nearly $190 billion.
\nRegional U.S. banks were hit the hardest. Shares of First Republic Bank (FRC.N) tumbled more than 60% as news of fresh financing failed to reassure investors and rating\u2019s agency Moody\u2019s reviewed it for a downgrade.
\nEurope\u2019s STOXX banking index (.SX7P) closed 5.7% lower. Germany\u2019s Commerzbank (CBKG.DE) fell 12.7% and Credit Suisse (CSGN.S) slid 9.6% to a record low.
\nBiden said his administration\u2019s actions meant \u201cAmericans can have confidence that the banking system is safe,\u201d while also promising stiffer regulation after the biggest U.S. bank failure since the 2008 financial crisis.
\n\u201cYour deposits will be there when you need them,\u201d he said.
\nSVB\u2019s customers were given access to all their deposits on Monday and regulators set up a new facility to give banks access to emergency funds. The Fed made it easier for banks to borrow from it in emergencies.
\nIn a letter to clients, SVB\u2019s new CEO Tim Mayopoulos said the bank was open and conducting business as usual within the United States and expected to resume cross-border transactions in the coming days.
\n\u201cI recognize the past few days have been an extremely challenging time for our clients and our employees, and we are grateful for the support of the amazing community we serve,\u201d said Mayopoulos, a former CEO of federal mortgage finance firm Fannie Mae who was appointed by the FDIC to run SVB.
\nUS bank regulators sought to reassure nervous customers on Monday who lined up outside SVB\u2019s Santa Clara, California, headquarters, offering coffee and donuts.
\n\u201cFeel free to transact business as usual. We just ask for a little bit of time because of the volume,\u201d FDIC employee Luis Mayorga told waiting customers.
\nRegulators also moved swiftly to close New York\u2019s Signature Bank SBNY.O, which had come under pressure in recent days.
\n\u201cA serious investigation needs to be undertaken on why the regulators missed red flags … and what needs to be overhauled,\u201d said Mark Sobel, a former senior Treasury official and U.S. chair of Official Monetary and Financial Institutions Forum, a think tank.
\nCanada\u2019s banking regulator took steps to begin daily check-ins with banks that will enable it to monitor their liquidity, The Globe and Mail reported on Monday.
\nIn the money markets, indicators of credit risk in the U.S. and euro zone banking systems edged up.
\nEmboldened by bets the Fed may have to slow its rate hikes, the price of gold, a popular safe-haven raced above the key $1,900 level.
\nThose expectations also weighed on Japan\u2019s banking stocks (.IBNKS.T), which tumbled 6.7% in early Asian trade to their lowest since December.
\nYunosuke Ikeda, chief equity strategist at Nomura Securities, said the shift to much less aggressive Fed hike expectations has also tempered the outlook for an eventual pivot in Japan away from ultra-low interest rates.
\n\u201cThe pressure to unwind positions is extremely big here,\u201d said Ikeda. The prospect of higher interest rates had been \u201cthe reason investors have been really excited about Japan bank stocks.\u201d
\nCompanies around the globe with SVB accounts rushed to assess the impact on their finances. In Germany, the central bank convened its crisis team to assess any fallout.
\nAfter marathon weekend talks, HSBC HSBA.L said it was buying the British arm of SVB for one pound ($1.21). HSBC\u2019s Hong Kong listed shares fell more than 6% on Tuesday.
\nWhile SVB UK is small, its sudden demise prompted calls for government help for Britain\u2019s startup industry, and its heavily exposed biotech sector in particular.<\/p>\n","protected":false},"excerpt":{"rendered":"
ISLAMABAD Shockwaves from the collapse of Silicon Valley Bank further pounded global bank stocks on Tuesday as assurances from United States President Joe Biden and other policymakers did little to calm markets and prompted a rethink on the interest rate outlook. Biden\u2019s efforts to reassure markets and depositors came after emergency U.S. measures to shore […]<\/p>\n","protected":false},"author":2,"featured_media":319552,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-319539","post","type-post","status-publish","format-standard","has-post-thumbnail","category-world"],"yoast_head":"\n