More than £50bn wiped off FTSE 100 amid banking stock sell-off

More than £50 billion has been 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.

The collapse of tech-focused Silicon Valley Bank sparked fears across Wall Street that the banking system was being crippled by a relentless cycle of interest rate rises.

It has prompted calls to the Federal Reserve to rethink its plans and leave interest rates unchanged at the next meeting, in hopes of calming global markets.

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.

The FTSE 100 suffered bigger declines than seen in the aftermath of September’s mini-budget, which had been described as the “worst day ever seen in the markets”, according to one analyst.

It dropped by more than 2.6% at one point during Monday trading, steeper than the trough of 2.5% recorded on September 23.

Big banks Standard Chartered and Barclays sunk to the bottom of the index.

It closed 199.72 points lower, or 2.58%, at 7,548.63, and meant about £51.5 billion was wiped off the value of the index over the course of the day.

Meanwhile, US investors had been somewhat placated by President Joe Biden’s reassurances the nation’s financial systems were safe and sound.

“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” the leader told Americans.

It meant the US’s biggest stock exchanges were in the green by the time European markets closed, with the S&P 500 up 0.35% and Dow Jones up about 0.1%.

Other top European markets finished the day even more scathed than in Britain, with the German Dax tumbling more than 3% and the French Cac 40 declining 2.9% at close.

Chris Beauchamp, chief market analyst at online trading platform IG, said: “US stocks have had a busy start to the week but have overall succeeded in making gains as the actions of US regulators provide some comfort to worried investors.

“The same cannot be said of Europe, which is deep in the red as traders this side of the Atlantic wait to see whether the pressure on European banks will turn into something that requires authorities to step in.

“It promises to be a roller-coaster week thanks to Tuesday’s US consumer prices inflation (CPI) and Thursday’s European Central Bank rates decision, leaving markets at risk of further falls.”

The pound was holding firm despite the stock market woes and was up by about 1% against the US dollar at 1.215 and up by 0.1% against the euro at 1.1318.

In company news, HSBC saw its share price decline by more than 4% despite announcing it had acquired Silicon Valley Bank’s (SVB) UK business in the all-important rescue deal.

Europe’s biggest bank said it paid just £1 for the troubled bank, indicating that regulators were confident it could easily take on any risk from SVB UK’s customers.

However, its share price closed 4.1% 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 pre-tax loss of £45 million against sharp claims inflation, particularly across its motor arm. Its share price closed 4.8% lower.

The biggest risers on the FTSE 100 were Endeavor Mining, up 70p to 1,720p, Fresnillo, up 25.2p to 747.4p, Severn Trent, up 58p to 2,824p, Convatec Group, up 3.8p to 220.6p, and Admiral Group, up 30.5p to 1,912p.

The biggest fallers on the FTSE were Standard Chartered, down 51p to 688.8p, Barclays, down 9.94p to 147.48p, Beazley, down 36.5p to 545p, Ashtead Group, down 340p to 5,192p, and Ocado Group, down 27.3p to 423.8p.