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Bank fears return to haunt global stock markets

March 19, 2023 00:00:00

NEW YORK, Mar 18 (AFP): Stocks markets tumbled again on Friday as fears of a banking crisis resurfaced despite massive financial lifelines thrown at embattled lenders to prevent contagion across the sector.

Markets had rallied on Thursday after Wall Street titans including JP Morgan, Bank of America and Citigroup pledged to inject $30 billion into First Republic Bank.

Credit Suisse had also rebounded after it said it would borrow up to $54 billion from the Swiss central bank.

But shares of First Republic Bank and Credit Suisse dove back deep in the red on Friday, with the US lender slumping 33 per cent and Switzerland's second biggest bank dropping eight per cent.

The stock prices of other major banks also fell, with JP Morgan, Citigroup and Bank of America down at least three per cent.

The wider markets were also in the red. On Wall Street, the S&P 500 finished down 1.1 per cent.

In Europe, London stocks closed down 1.0 per cent, while Frankfurt slumped 1.3 per cent and Paris dropped 1.4 per cent to cap a rollercoaster week.

"The negative disposition for the broader market has a familiar driver: worries about the state of the banking industry," said market analyst Patrick O'Hare at Briefing.com.

Banks stepped in to save First Republic over fears it could suffer a run of withdrawals by customers worried it would follow US lenders Silicon Valley Bank and Signature Bank, which went under last week and fueled fears of another financial crisis.

O'Hare said the market was unnerved by data showing that bank borrowing from the US Federal Reserve's discount window hit a record high of approximately $153 billion for the week ending March 15, "exceeding anything seen during the financial crisis."

The Fed's discount window allows banks to quickly access funds, providing them with liquidity when customers withdraw more deposits than expected, and the record figure is an indication of stress in the sector.

"This week has been a liquidity crisis, but it seems that the moves by authorities to remedy the situation have not completely reassured wary investors," said Chris Beauchamp, chief market analyst at online trading platform IG.

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