By Shashwat Chauhan
(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 lost 2.4%, falling to an over two month low.
Shares of Europe’s largest bank HSBC 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 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.
U.S. authorities had announced plans over the weekend to limit the fallout from the collapse of SVB, while investors wagered that a rate hike by the U.S. Federal Reserve this month was no longer a certainty.
Prior to recent losses, British lenders started the year on steady ground as some positive earnings kept the sector ticking in a high-rate environment.
On the earnings front, Direct Line fell 7.4% after the motor insurer reported a 95% slump in 2022 operating profit.
The more domestically-focussed FTSE 250 midcap index fell 2.9%.
British American Tobacco, the manufacturer of Lucky Strike cigarettes, fell 3.1% after JP Morgan cut the stock’s rating to “neutral” from “overweight.”
Bucking the sombre mood, precious metal miners gained 1.4% as gold prices edged higher against a weakening U.S. dollar. [GOL/]
The focus is now shifting to UK’s spring budget due to be unveiled later in the day.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips and Dhanya Ann Thoppil)
