European shares fall 3% as Credit Suisse shares plunge to record low

European shares on Wednesday had their worst day in more than a year as a sell-off in bank stocks resumed on renewed investor concerns about stresses within the sector, with Credit Suisse plunging to a fresh record low.

Efforts by regulators and financial executives to ease contagion fears following tech-focused lender Silicon Valley Bank’s sudden collapse have failed to calm investors’ nerves.

Due to deepening worries over the European banking sector’s health, traders now increasingly see the European Central Bank increasing interest rates by 25 basis points on Thursday, down from the 50 basis points hike expected prior to the SVB collapse.

Dublin

The Irish market sank in line with those across Europe, with the Iseq closing 3.7 per cent lower as banking stocks were heavily hit by the trouble encircling Credit Suisse.

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Bank of Ireland plummeted 8 per cent to €8.83, while AIB closed 4.8 per cent lower at €3.54 and Permanent TSB Group declined 3.1 per cent to €2.47.

Flutter Entertainment, the owner of Paddy Power, sank 5.2 per cent to €151.75, while packaging group Smurfit Kappa fell almost 4.2 per cent to €32.71 and Ryanair dropped 4 per cent to €14.26. There was also a decline for CRH, with the building materials group ending 3.4 per cent lower at €45.09.

Food groups Kerry and Glanbia were among the few stocks in the green. Kerry rose 0.6 per cent to €89.88, while Glanbia closed 0.5 per cent higher at €13.04.

London

The FTSE 100 also recorded its worst day in a year. The blue-chip FTSE 100 was down 3.8 per cent, its biggest one-day drop day since February 2022, while the FTSE 250 midcap index lost 2.6 per cent.

UK banks resumed their brutal sell-off after Tuesday’s brief respite, falling 5.6 per cent. Shares of HSBC, Europe’s largest lender, slid 5 per cent, while Standard Chartered and Barclays dropped 7.7 per cent and 9.1 per cent, respectively.

Energy shares shed 8.4 per cent, while industrial miners lost 7.9 per cent as oil and metal prices fell.

Asia-focused insurer Prudential dropped 12.4 per cent despite reporting an 8 per cent jump in full-year profit.

Meanwhile, the UK economy is set to avoid a technical recession in 2023, but it will still contract this year, chancellor of the exchequer Jeremy Hunt said as he unveiled his spring budget.

Europe

The pan-European Stoxx 600 index closed the day 3 per cent lower, a day after recording its best day this year.

The banks sector index plunged 7.1 per cent, while Spain and Italy’s lender-heavy indexes lost more than 4 per cent each.

Credit Suisse’s shares tumbled 24.2 per cent and fell below two Swiss francs (€2.03) after the lender’s biggest shareholder said it could not raise its stake beyond 10 per cent, citing regulatory issues.

Retailers shed 4.4 per cent as the world’s biggest fashion retailer Zara-owner Inditex slumped 4.6 per cent after flagging higher investment spending. H&M, the world’s second-biggest fashion retailer, slid 8.5 per cent after a smaller-than-expected increase in sales.

United States

Wall Street stocks tumbled in early trading as turbulence at Credit Suisse revived fears of a banking crisis. US Treasury yields fell, with traders now expecting equal chances of a 25-basis-point rate hike and a pause at the Fed’s March meeting.

Amid several volatility halts, First Republic Bank fell 17.7 per cent, while PacWest Bancorp slid 17.2 per cent a day after shares of the battered banks staged a strong recovery.

Shares of their peer Western Alliance Bancorp as well as those of bank and brokerage Charles Schwab Corp reversed early declines to rise 7.1 per cent and nearly 2 per cent respectively.

Big US banks including JPMorgan Chase, Citigroup and Bank of America fell between 1 per cent and 6 per cent. – Additional reporting: Reuters