FTSE 100 tumbles on SVB and Signature Bank fallout – 13 March 2023
13 Mar 2023
FTSE 100 drops to a two-month low as banks increase losses in the wake of SVB.
HSBC falls after taking over SVB’s UK arm
British American Tobacco is down after JPM downgrade
Bank sector index hits over two-month low
FTSE 100 down 2.4%, FTSE 250 off 2.9%
March 13 (Reuters) – UK’s FTSE 100 fell on Monday, with banks extending losses as shock waves continue to reverberate through financial markets after U.S. regulators closed Silicon Valley Bank (SVB).
The blue-chip FTSE 100 (.FTSE) lost 2.4%, falling to an over two-month low.
Shares of Europe’s largest bank HSBC (HSBA.L) fell 1% after saying it will acquire the UK subsidiary of SVB for 1 pound, rescuing a key lender for technology startups in Britain.
UK banks (. FTNMX301010) slid 4.3%, hitting an over two-month low and extending last week’s declines of over 6%.
“It’s contagion risk (SVB collapse) that is resulting in investors pulling out investments in case it does have a domino effect in the UK,” said Giles Coghlan, chief market analyst at HYCM.
In contrast, Britain’s finance minister Jeremy Hunt said UK’s banking system is extremely secure, adding that the rescue of SVB’s UK arm was necessary to help protect some of the UK’s most strategic tech companies.
The FTSE 100 has tumbled after a muted open as the fall-out from the collapse of SVB and Signature Bank continues.
At 9.00am London’s lead index was at 7,648.59, down 99.76 points, or 1.29%.
In the UK authorities rushed to limit the damage from the closure of SVB by confirming the sale of its UK business to HSBC.
While in the US authorities launched emergency measures to shore up confidence in the banking system. Regulators said the failed bank’s customers will have access to all their deposits starting Monday and set up a new facility to give banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.
Victoria Scholar, head of Investment, interactive investor said: “HSBC’s acquisition of SVB UK is a welcomed development for its depositors and the wider banking system.”
“It means that SVB UK will avoid insolvency proceedings and its customers will be able to access deposits and banking services as normal from today. It will be interesting to see whether the start-up friendly style of lending offered by SVB and not the larger more traditional banking behemoths, will continue to be possible under the HSBC umbrella.”
Despite the move bank shares fell further with Lloyds Banking Group PLC (LSE: LLOY) down 2%, Barclays dropped 1%, HSBC Holdings PLC (LSE: HSBA) fell 2% and NatWest declined 0.8%.
The banking turmoil has prompted speculation that central banks will put likely rate rises on hold or at least scale them back.
Victoria Scholar said: “In the UK, interest rate futures are now pricing in a roughly 25% chance that the Bank of England does not raise rates at its March meeting in what could be a significant near-term change in policy direction.”
As for US rates, Goldman Sachs (NYSE:GS) predicted the US Federal Reserve will be forced to curb its plans to raise interest rates. Analysts at Goldman expect the Fed will now postpone a rate hike expected for 22 March because of concerns about the impact of SVB’s failure on other banks. Previously, the Wall Street giant had forecast US interest rates would rise by 25 basis points.
Shares in THG rose 3.2% after confirming that it does not have any exposure to SVB, either in relation to cash deposits or debt facilities. IP Group PLC (LSE: IPO) did likewise and shares rose 3.4%.
FTSE 100 TECHNICAL ANALYSIS DAILY CHART:
FTSE 100 is currently trading in the down channel.
FTSE 100 is currently trading below all SMA.
RSI is in the selling zone which suggests bearishness and Stochastic suggests a downtrend.
FTSE 100 immediate resistance is at 7631.6 & its immediate support level is 7539.3
HOW TO TRADE FTSE 100 IN THIS WEEK
FTSE 100 is trading in down Channel; it is broken its important support level and the previous day low; it will continue to trade downside until any trend reversal.