British stocks plunge, sterling rises after collapse of U.S. bank SVB

2023-March-14 09:25 By: Xinhua

LONDON, March 13 (Xinhua) -- British stocks plunged on Monday, and the pound climbed against the U.S. dollar as the Silicon Valley Bank (SVB) collapse spooked financial markets and raised expectations that U.S. rate hikes would slow down.

The FTSE 100 index, the leading benchmark for blue chip companies listed in the United Kingdom (UK), ended the session down 2.58 percent, or 199.72 points, at 7,548.63. Standard Chartered and Barclays were among the worst performers.

"Despite the best efforts of governments and regulators, the market was still very edgy on Monday as investors considered the fallout from SVB's collapse," said Russ Mould, investment director at the online investment platform AJ Bell.

"There's plenty to worry about, whether it be the conflict in Ukraine, inflation, rising interest rates and now a potential banking crisis has been added to the mix. Little surprise people are feeling a bit spooked," Mould added.

The British pound rose to the strongest rate in weeks, trading at almost 1.22 U.S. dollars. "The SVB collapse has hurt the U.S. dollar, as market pricing of interest rate expectations has massively shifted," said market analyst Kenny Fisher from online forex trading platform and broker OANDA.

Just last week, the markets had priced a 50-basis point (bp) hike at 70 percent, and a 25-bp increase at 30 percent, Fisher said. Currently, there is a 70 percent likelihood of a 25-bp increase, he added. "The dust hasn't yet settled from the SVB failure so it's understandable that the markets are jittery."

Californian authorities on Friday closed SVB, previously the 16th largest bank in the United States. After the tech-focused lender reported huge losses from securities sales, this sparked a run on the bank's deposits.

The SVB collapse is the largest bank failure since the collapse of U.S. savings and loan association Washington Mutual in 2008.

Editor: WXL
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