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Banking stocks steady in aftermath of Silicon Valley Bank collapse

Banking stocks steadied on Tuesday as fears over the knock-on effect of Silicon Valley Bank’s failure began to calm.

Global trading started on another downbeat note as shockwaves from Monday’s market rout spread further to the Asian markets at the start of the session.

London’s FTSE 100 also opened lower but has steadied as traders saw fears over potential Silicon Valley Bank contagion continue to ease.

Banking firms HSBC and Standard Chartered were both among the early fallers but both returned to gains by afternoon trading due to the improvement in sentiment.

The FTSE 100 was up 1% at 7,626 points by 2.30pm on Tuesday.

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It followed a 2.58% slide on Monday, as more than £50 billion was wiped off the value of the stock exchange over the course of the day.

The improvement was significantly linked to the US consumer price index (CPI) inflation reading for February, which slowed to 6% from 6.4% in the previous month.

The reading was broadly in line with economists’ expectations, although core CPI, which excludes food and energy, was slightly above predictions.

HSBC
HSBC and Standard Chartered were among the early FTSE fallers, but they both rebounded (PA)

Economists at Jefferies said the data “suggests that the Fed is going to remain on-track for a 25 bp (basis point) hike on March 22”, when it considers the latest potential change to interest rates.

US equity markets climbed strongly as a result.

It came after efforts by US President Joe Biden late on Monday and other policymakers responding to the failure of Silicon Valley Bank did little to turn sentiment around for cautious investors.

He said: “Americans can have confidence that the banking system is safe. Your deposits will be there when you need them.”

Nevertheless, he promised to look at new banking regulations to make it less likely that such a large bank failure can happen again.

Banking shares in Asia – where the first global markets open – continued their decline on the opening bell on Tuesday, with a particularly poor start for Japanese firms.

The Nikkei 225 in Tokyo fell 2.2%, while the S&P/ASX 200 closed 1.4% down, representing a third consecutive day of decline.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: “Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week.”