Shares in US regional banks Zions Bancorporation and Western Alliance plunged by over 9% and 10% respectively, sparking fears of a global market contagion. The banks announced significant credit issues, with Zions writing off $50m and Western Alliance facing a $100m bad loan.
While these banks are relatively small, the news drew inevitable comparisons to the 2023 collapse of Silicon Valley Bank (SVB), which also began as a regional issue. Analysts now fear a domino effect, pointing to other recent credit-related bankruptcies.
The fears quickly went global. Asian markets, including the Nikkei and Hang Seng, fell sharply. In Europe, the FTSE 100, Dax, and Cac 40 all declined, dragged down by a massive sell-off in bank stocks like Barclays and Deutsche Bank, which shed around 6%.
The market’s “fear index,” the VIX, surged over 22%, its highest close since April. As investors dumped equities, they rushed into safe havens, pushing the price of gold to a new all-time high of $4,378 an ounce.
3