LONDON/SYDNEY: Tumbling bank shares pulled global stocks lower on Friday, while gold hit a fresh peak, as signs of credit stress at US regional lenders unnerved investors and drove them into safe-haven assets.
European banks fell 2.8 per cent in early trade — dragging the wider stock index down 1.4 per cent — with the likes of Deutsche Bank and Barclays down more than 6 per cent, following losses across Asian financial stocks.
S&P 500 futures and Nasdaq futures were down 0.8-0.9 per cent ahead of more earnings from US regional banks later in the day. Many stock markets have hit record highs in recent weeks, but some investors have become wary that corners of the market could be in a bubble.
Overnight, US regional lender Zions sank 13 per cent after disclosing it would take a $50 million loss in the third quarter on two loans from its California division. Western Alliance's stock slumped 11 per cent after it initiated a lawsuit alleging fraud by an investment firm, Cantor Group V, LLC. Cantor's attorneys denied the allegations.
The developments pummelled US banking stocks and weighed on the US dollar to the benefit of the yen and Swiss franc.
"While the recent issues of the two lenders seems well contained, where there is smoke there is often fire and the remedy of the 2023 crisis has created a tinderbox for another banking flare-up", said IG analyst Tony Sycamore, referring to a series of bank failures that year which prompted the US Federal Reserve to take steps to stabilise the financial system.
Safe-haven Treasuries rallied further, with two-year yields down to a fresh three-year low of 3.376 per cent earlier in the session as investors priced in at least two more quarter-point rate cuts from the Fed this year. — Reuters
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