Bank shares led a global market plunge as fears over the private credit market intensified. The sell-off was sparked by two US regional banks, Zions Bancorporation and Western Alliance, which reported significant exposures to bad loans, one involving alleged fraud.
European markets were hit hard. The FTSE 100, Dax, and FTSE Mib all fell, but the banking sector was the epicenter. The pan-European banking industry lost €37.4 billion in value, with Barclays, Deutsche Bank, and Banco Sabadell all falling around 6% or more.
The news from the small US lenders sparked “inevitable comparisons” to the 2023 SVB collapse, raising fears of a systemic issue after a long period of high interest rates. This anxiety followed other recent credit-related bankruptcies, like Tricolor and First Brands.
As investors grew jittery, they turned to safe-haven assets. Gold prices surged to a new record of $4,378 an ounce. The VIX “fear index,” a measure of market volatility, spiked to its highest level in months, signaling deep unease.