It was a case of SVB déjà vu as bad loan woes at two small US regional banks triggered major moves in global markets. The news sparked a massive sell-off in stocks and a surge into safe-haven assets like gold.
Zions Bancorporation and Western Alliance plunged after reporting multi-million dollar bad loans. This raised “broader questions” about credit quality after a long period of high interest rates, sparking fears of a repeat of the 2023 crisis.
The market reaction was global. Bank stocks were hammered, with European lenders losing €37.4 billion. Barclays and Deutsche Bank fell around 6%. Stock indices in London, Frankfurt, Tokyo, and Hong Kong all dropped.
The VIX “fear index” surged over 22%, and gold hit a new all-time high of $4,378 an ounce. Analysts warned that “storm clouds are gathering” and more “cockroaches” could emerge.