Markets: Bank crisis

Stocks tumble amid Silicon Valley Bank woes

London Stock Exchange

The Bank of England responded to the crisis emerging around tech sector lender Silicon Valley Bank by applying to place Silicon Valley Bank UK into a Bank Insolvency Procedure.

In a statement issued before midnight, the BoE this would protect eligible depositors under the Financial Services Compensation Scheme.

It added that SVBUK has a limited presence in the UK and no critical functions supporting the financial system.

“In the interim, the firm will stop making payments or accepting deposits.”

The BoE stepped in after SVB UK applied for £1.8bn in short-term emergency funding via its discount window facility,

The London stock market suffered a triple-digit fall as news of problems at Silicon Valley Bank,  a key lender to technology start-ups, spread to the UK and raised fears of a wider fall-out. There was concern that it would impact on funding for the global tech market.

Shares in Nasdaq-listed SVB plunged by nearly 70% in two days and wiped billions from the value of US and European lenders today.

Trading in SVB’s shares were halted amid reports that it is looking to sell itself.

The FTSE 100 closed 131.63 points (-1.67%) lower at 7,748.35.

Shares in JP Morgan and Bank of America have fallen by about 5% since Thursday morning and in Goldman Sachs by over 3%.  HSBC, NatWest, Lloyds Banking Group and Barclays all fell sharply this morning.

SVB, which funds the tech sector, has been hit by soaring inflation and rate hikes in the past 12 months, with tech firms suffering sharp valuation haircuts and VCs writing off billions of dollars of value from their portfolios.

Some funds are said to have advised clients to withdraw from the bank. Its UK subsidiary, SVB UK, moved to reassure its customers it was a standalone independent UK regulated bank with its own balance sheet and governance structure.

AJ Bell Investment Director Russ Mould said: “This leaves investors wondering who is exposed to whom and they are taking no chances as they sell banking stocks left, right and centre.”

US jobs

The bank crisis overshadowed news on the hotter-than-expected US jobs figures which saw Wall Street open lower.

According to the Department of Labor, non-farm payrolls grew by 311,000 – quicker than consensus estimates for a rise of 225,000.

The Dow Jones Industrial Average was down 0.12%, while the S&P 500 slipped 0.45% and the Nasdaq Composite saw out the session 0.64% weaker.

Pantheon Macroeconomics’ Ian Shepherdson said: “The report will not stop the Fed hiking in March, though it does lower the odds of a 50bp increase, if we’re right about next week’s activity data and the CPI/PPI reports – also due next week – being better than in January. That is our base case, so we’re sticking to our 25bp forecast.”

Economy rebounds

Official figures showed the UK economy grew by 0.3% January, reversing a 0.5% fall in December and defying expectations that it would shrink.

Full story here

7am: Robert Walters retires

Robert Walters, chief executive of the eponymous recruitment agency, is retiring and will step down from the board at the AGM on 27 April.

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7am: FirstGroup

FirstGroup said it anticipates profits for the 2023 financial year to be ahead of previous expectations following strong trading in its bus and rail operations.

Graham Sutherland, chief executive, said the second half has been driven by increased passenger volumes and improved operational performance in bus and stronger than anticipated demand for its open access operations in rail.

“We remain committed to working closely with our partners to deliver successful bus and rail networks that serve the needs of our customers and communities and to playing a central role in achieving many of society’s economic, social and environmental aims.”

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