European stocks logged their steepest one-day fall this year on Monday on continued drag from banking stocks even as authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank. Shockwaves were sent across the UK and Europe despite HSBC swooping in to buy the bank’s UK arm and reassuring firms that banking services would continue as normal.
Dublin
The Dublin market was down 3.35 per cent to 8,103 on Monday evening, as banking shares slumped in line with the wider European trends amid the shock waves from the SVB collapse which continued to put pressure on financial stocks. Bank of Ireland slid more than 6.5 per cent over the session, closing at €9.23, while AIB was down 7.3 per cent to €3.54 by the close. Permanent TSB was 2.79 per cent off.
Elsewhere, Kingspan lost almost 3.5 per cent, and CRH was down 4.5 per cent by the close of the session. Smurfit Kappa lost 2.44 per cent, while Ryanair fell 2.43 per cent and Flutter Entertainment shed 2.6 per cent. The Paddy Power owner ended the day at €155.10.
London
More than £50 billion was wiped off the UK’s biggest stock market on Monday after the second- and third-biggest bank failures in US history spooked investors across the globe.
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The FTSE 100 closed 199.72 points lower as it suffered bigger declines than seen in the aftermath of September’s mini-budget.
HSBC saw its share price decline by more than 4 per cent despite announcing it had acquired SVB’s UK business in the all-important rescue deal. Europe’s biggest bank said it paid just £1 for the troubled firm, indicating that regulators were confident it could easily take on any risk from SVB UK’s customers.
However, its share price closed 4.1 per cent lower as the stock was caught up in investor jitters over the wider banking sector.
Meanwhile, insurer Direct Line admitted its 2022 results were “disappointing” and that the group did not navigate the challenges of inflation and regulatory reform as effectively as it would have liked.
The group reported a full-year pretax loss of £45 million against sharp claims inflation, particularly across its motor arm. Its share price closed 4.8 per cent lower.
Europe
The pan-European Stoxx 600 index closed the day 2.3 per cent lower, with banks, financials and insurer stocks, along with energy stocks, bearing the brunt of selling pressure.
European banking stocks dropped 5.7 per cent, notching their worst two-day sell-off since the Russia-Ukraine war broke out early last year.
The wider risk-off moves sent Credit Suisse shares down 9.6 per cent to a fresh record low.
Germany’s Commerzbank slumped 12.7 per cent, France’s Société Générale and Spain’s Sabadell fell 6.2 per cent and 11.4 per cent, respectively.
However, euro-zone banking supervisors saw limited consequences for the region’s banks from the collapse of the US lenders, while Moody’s Investors Service noted that Europe’s banks were unlikely to get hit by bond portfolio losses.
New York
The positive effect from the American regulators’ overnight support actions in the banking system quickly evaporated on Monday morning, with stocks signalling that fallout from the incident is far from over.
Turmoil continued to engulf First Republic Bank, whose shares plunged more than 60 per cent in US premarket trading even after the lender moved to try to quell concern about its liquidity after the failure of SVB. PacWest Bancorp lost more than 30 per cent, while Columbia Banking System fell about 5 per cent.
While US regulators introduced a new backstop for banks that Federal Reserve officials said was big enough to protect the nation’s deposits, the surprise announcement that New York’s Signature Bank was being shuttered reminded investors that further turmoil, at least among regional banks, was still possible. A senior US Treasury official said some institutions had issues similar to the failed Silicon Valley Bank.
Most large US banks also erased earlier gains in US premarket trading, with JPMorgan Chase, Bank of America and Wells Fargo all trading lower. – Additional reporting: PA, Bloomberg, Reuters
