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Silicon Valley Bank causes nervousness and pressure on stocks

Fears of loan defaults in the banking sector due to turmoil surrounding the troubled Silicon Valley Bank caused a slide in share prices on Wall Street and the worst weekly performance since June 2022. In addition, interest rate concerns weighed on share prices after significantly more jobs were created in the US in February than expected. Although the increase in employment was clearly below the strong level of the previous month, the labour market remains extremely robust and the latest job market data point to a continued restrictive pace of the Federal Reserve.

Date
Mots
Alessandro Fezzi, LGT
Temps de lecture
5 minutes
Banking Sector

The Dow Jones Industrial fell before the weekend by 1.07% to 31,909.64 points and thus recorded a loss of more than 4% over the week. The broad S&P 500 fell on Friday by 1.45% to 3,861.59 points and on the Nasdaq, the indices gave up 1.4%. In addition to the US jobs report, Silicon Valley Bank was in focus. On Friday, the financial institution, which specializes in financing small and medium-sized tech and biotech companies, was temporarily closed, and placed under government control. This put massive pressure on the entire banking sector.

Meanwhile, the latest data confirmed a still robust labour market in the US. At 311,000 newly created jobs, the increase was significantly lower than the massive job growth at the beginning of the year, with 504,000 "non-farm payrolls", but analysts had provided a significantly lower consensus forecast of 225,000 jobs in February. The unemployment rate, as reported in a separate survey, was slightly higher last month than in January at 3.6%, but the 3.4% reported at the beginning of the year was also the lowest level since May 1969. From this data set, investors must assume that the Fed will continue to raise interest rates - as reiterated last week by Fed Chairman Powell. Some relief was provided at least by the average hourly wages reported for February. These rose by 0.2% month-on-month and by 4.6% year-on-year, slightly less than expected. However, the labour shortage lamented by many companies is likely to keep up the pressure on wages. Nevertheless, investors seem to expect interest rates to continue to be raised more cautiously for the time being. This found expression in a weaker US dollar and falling yields on the bond market. For example, the benchmark yield on ten-year US government bonds declined to 3.69%.

Markets in the Asia-Pacific region were mixed to start the week after US regulators announced plans to shore up both depositors and financial institutions linked to Silicon Valley Bank to avoid further systemic risk. Hong Kong's Hang Seng Index gained 2.1% led by technology stocks. The Hang Seng Tech Index gained more than 3%. In mainland China, the Shenzhen Component climbed 0.4% % and the Shanghai Composite rose 0.8%. in Tokyo, the Nikkei 225 slipped about 1%. 

Corporate news today in focus: Porsche AG with annual figures. 

Economic data today in focus: No important economic data is due for publication.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

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