Stocks plummet on Wall Street and FTSE on renewed bank fears

FTSE The logo of Swiss bank Credit Suisse is seen in front of a branch office in Bern, Switzerland November 29, 2022. REUTERS/Arnd Wiegmann
Wall St and the FTSE fell as the ongoing troubles of Swiss bank Credit Suisse troubled investors. Photo: Arnd Wiegmann/Reuters

The FTSE 100 and European stocks finished in the red this Wednesday following the UK's Spring budget announcement as the ongoing troubles of Swiss bank Credit Suisse (CS) troubled investors.

The FTSE 100 (^FTSE) lost 3.61% to close at 7,361 points, while the CAC 40 (^FCHI) in Paris plunged 3.39% to 6,899 points. In Germany, the DAX (^GDAXI) fell 3.05% to 14,770.

Markets heard UK chancellor Jeremy Hunt deliver his "budget for growth" which aims to get more people back into the labour market.

A key policy is the expansion of free childcare to cover one- and two-year-olds in England.

The Treasury said the Energy Price Guarantee will be kept at £2500 for an additional three months from April to June in a move saving a typical household £160.

Read more: Budget 2023: Jeremy Hunt scraps life-time pension allowance as he says UK will avoid recession

"With a keen eye on trying to maintain financial stability particularly the close shave this week given Silicon Valley Banks’s collapse, he looks set to focus on highly targeted policies, rather than tax cuts to propel growth," Susannah Streeter, head of money and markets and Hargreaves Lansdown, said.

"He has more wiggle room as public sector borrowing, still high by historical standards is set to undershoot forecasts made by the Office of Budget Responsibility."

"Labour shortages mean high inflation is stubborn and he’ll be trying to coax people back to work with a combination of sweets and a naughty step approach, with a widening of sanctions expected for those who don’t look for work."

Read more: Budget: Pound soars as Jeremy Hunt says recession threat is over

US stocks were sharply lower Wednesday as two economic prints showed a slowdown in February, coupled with fresh turmoil at Credit Suisse that weighed on sentiment.

The Dow Jones (^DJI) lost 2.13% to 31,471 points. The S&P 500 (^GSPC1) retreated 1.9% to 3,844 points and the tech-heavy NASDAQ (^IXIC) fell 1.32% to 11,277.

In Asia, Tokyo’s Nikkei 225 (^N225) finished near the flatline at 27,229 points, while the Hang Seng (^HSI) in Hong Kong gained 1.55% to 19,546. The Shanghai Composite (000001.SS) also gained ground, rising 0.55% to 3,263 points.

Back in London, insurance major Prudential (PRU.L) reported a rise in annual underlying earnings and said 2023 had "started well" as the removal of China's COVID restrictions have helped boost sales.

Read more: Childcare, pensions, tax, benefits – the key takeaways from Jeremy Hunt's statement

Prudential chief executive Anil Wadhwani said: “The removal of the bulk of COVID-19-related restrictions across the region and the progressive opening up of the Chinese mainland economy has meant that 2023 has started well with encouraging progress in year-on-year sales, with group-wide annual premium equivalent (APE) sales for the two months ended February 2023 up 15% over the prior year.”

Despite the rise in earnings, Prudential shares lost over 12% after its annual results as it revealed some exposure to Silicon Valley Bank (SIVB).

The risk averse session for financial stocks highlights the increasingly uncertain outlook.

However, Deutsche Bank strategist Jim Reid said: “Obviously we’re still a long way from the pre-SVB state of affairs that prevailed last Wednesday, but with worries about bank contagion starting to subside, we’re finally seeing some optimism return to financial markets again.”

But this was before Credit Suisse shares hit another all-time low for a second consecutive session, falling 21%, before shares were halted from trading.

Read more: Budget 2023: UK will not enter recession, OBR forecasts

The group’s largest investor, Saudi National Bank, said it could no longer provide the Swiss Bank with further financial credit, according to a report by Reuters.

“We cannot because we would go above 10%. It’s a regulatory issue,” said Saudi National Bank chairman Ammar Al Khudairy.

Shares of other European banks are also taking a hit from the selloff surrounding Credit Suisse. BNP Paribas (BNP.PA), Societe Generale (GLE.PA) and Commerzbank (CBK.DE) all fell around 10%.

In the UK, Barcalys (BARC.L) fell 8.64% while NatWest (NWG.L) was down 5.66%, and HSBC (HSBA.L) slumped 5.03%.

Read more: Budget 2023: UK house prices to fall by 10%, OBR predicts

BlackRock (BLK) chief executive Larry Fink said in his annual letter to shareholders that "it's too early to know how widespread the damage is" following the failures in the US that have also included Silvergate (SI) and Signature Bank (SBNY).

The pound (GBPUSD=X) was trading lower against the dollar after of the Spring budget as the US banking crisis continues to cause ripples through the markets.

Meanwhile, Brent crude (BZ=F) also plummeted and was trading at around $72 per barrel amid bearish global investor sentiment trigged by US bank failures.

OPEC on Tuesday further raised its forecast for Chinese oil demand growth in 2023 due to the relaxation of the country’s COVID-19 curbs, although it left the global demand total steady, citing potential downside risks for world growth.

Watch: Watch: Key points from Jeremy Hunt's Spring budget 2023

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