- Investors are now assessing whether the latest credit market strains could have a similar ripple effect. The overnight sell-off on Wall Street spilled into Asian and European markets, interrupting an AI-driven rally that some analysts warn could be forming a market bubble. Some experts, however, believe the current troubles in U.S. regional banks remain contained.
- European bank shares took a sharp hit, with the region’s banking index losing nearly 3%. Deutsche Bank and Barclays each fell about 6%, while Societe Generale dropped 4.6%. The decline also spread to Asia, where Japanese banks and insurers were among the hardest hit.
Concerns about the credit quality of U.S. regional banks rippled through global financial markets on Friday, dragging down stocks worldwide and reviving memories of the confidence crisis that unsettled investors just over two years ago.
Wall Street, according to news reports, opened on a mixed note as caution prevailed, with investor sentiment weighed down by renewed anxiety over the banking sector. The sell-off added to broader market unease fueled by escalating U.S.-China trade tensions and growing uncertainty over the global economic outlook.
Wall Street, according to news reports, opened on a mixed note as caution prevailed, with investor sentiment weighed down by renewed anxiety over the banking sector. The sell-off added to broader market unease fueled by escalating U.S.-China trade tensions and growing uncertainty over the global economic outlook.
The recent exposure of several regional banks to two U.S. auto bankruptcies reignited fears about lending standards, echoing memories of the 2023 collapse of Silicon Valley Bank — when high interest rates triggered bond losses and sent banking shares tumbling worldwide.
Investors are now assessing whether the latest credit market strains could have a similar ripple effect. The overnight sell-off on Wall Street spilled into Asian and European markets, interrupting an AI-driven rally that some analysts warn could be forming a market bubble. Some experts, however, believe the current troubles in U.S. regional banks remain contained.
“Pockets of the U.S. banking sector, including regional banks, have raised concerns in the market,” said Russ Mould, Chief Investment Officer at AJ Bell. “This includes Zions Bank reporting unexpected losses on two loans, and Western Alliance revealing a borrower had committed fraud.”
Major U.S. banks declined in Friday trading, capping a week that began with solid earnings before sentiment soured. The KBW Bank Index, which tracks large-cap banks, fell 0.4%.
White House economic adviser Kevin Hassett sought to reassure investors, stating that U.S. banks hold “ample reserves” and that he remains confident in the stability of credit markets.
He added in an interview with Fox Business Network that administration officials — led by Treasury Secretary Scott Besant and Federal Reserve Chair Michelle Bowman — are “getting things sorted out right now,” without elaborating.
“We’re seeing a wave effect — U.S. bank stocks sell off overnight, then Asia wakes up, Europe wakes up, and so on,” said James Rossiter, Global Head of Macro at TD Securities.
European bank shares took a sharp hit, with the region’s banking index losing nearly 3%. Deutsche Bank and Barclays each fell about 6%, while Societe Generale dropped 4.6%. The decline also spread to Asia, where Japanese banks and insurers were among the hardest hit.
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