Macroeconomy

US bad loan panic sinks global stock markets

The main British banks, the most affected, lose 12.8 billion of their share value.

LondonThe London Stock Exchange experienced a day of heavy losses this Friday after two regional US banks, Western Alliance Bank and Zions Bancorp, warned Thursday night of losses in the millions due to fraudulent or unpaid loans. The alert has set off alarm bells among international investors, who fear a new wave of vulnerability in the financial system, causing a widespread decline in global markets.

The FTSE 100, the City's benchmark index with a strong exposure to the international financial sector, fell as much as 1.5% at the opening and remained negative until midday, down 1.4%. Major British banks were the hardest hit: Barclays plummeted more than 6%, and Standard Chartered, Lloyds, and NatWest lost nearly 5%. In total, more than £12.8 billion was wiped off the market value of British financial institutions in just a few hours.

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The financial earthquake has had a global impact. In Europe, the German Dax fell more than 2% and the French Cac 40 more than 1%, while in Asia the Nikkei 225 and the Hang Seng fell by up to 2% in the early hours. The Ibex was down 0.8% at midday, although this data is also heavily influenced by the effects of the failure of BBVA's takeover bid against Sabadell.

In any case, investors, frightened by the possibility of a credit crunch, have sought refuge in safe havens: the price of gold has reached a new record of $4,380 per ounce, and the VIX volatility index, known as fear index, has soared to its highest level since April.

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The source of the storm are the announcements by US regional banks Zions Bank, which has disclosed a $50 million loss on two failed loans, and Western Alliance, which has revealed it is involved in litigation over an allegedly fraudulent $100 million loan. Shares in these entities have collapsed by more than 10% and have dragged down the rest of the sector: the SPDR S&P Regional Banking ETF index has fallen by 6%.

This crisis comes at a time of growing distrust about the health of the private credit market, valued at three trillion dollars, following the recent bankruptcies of the auto loan company Tricolor and the component manufacturer First Brands. The director of the International Monetary Fund, Kristalina Georgieva, had said this week that the shadow banking It kept her awake at night, and JP Morgan boss Jamie Dimon reminded everyone that "when you see one cockroach, there are probably more."

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Although analysts say there is no evidence of a systemic collapse, a sense of fear dominates the stock markets. "It's more a question of confidence and liquidity than a structural problem," Dilin Wu of Pepperstone Group told the BBC. AJ Bell's chief investment officer, Russ Mould, summed up the general sentiment: "Investors have become spooked. There is no sign of trouble at British banks, but they often have a knee-jerk reaction when there is turmoil in the sector."

Moreover, economic uncertainty has been amplified by other factors: warnings of a possible bubble surrounding investment in artificial intelligence in the US, fears of a new trade war with China, and weak British growth, which only grew 0.1% in August. Against this backdrop, the pound has depreciated against the Swiss franc to its lowest level since 2022, and markets are betting that the Federal Reserve will cut interest rates by one percentage point over the next six months.