Concerns over the underlying health of the economy mounted as new woes at US regional banks rattled global markets. Analysts suggest that after a long period of high rates, credit losses are now emerging, raising questions about lending practices.
The immediate trigger was news from Zions Bancorporation and Western Alliance, which are facing $150 million in combined bad loans. This sparked fears of a repeat of the 2023 SVB crisis.
The market reaction was global and severe. Bank stocks led the decline, with the European sector losing €37.4 billion. Major indices in Europe and Asia, including the FTSE 100, Dax, and Nikkei, all fell significantly.
The “wall of worry” among investors grew, leading to a flight to safety. Gold prices hit a record high of $4,378 an ounce, its best week since 2008. The VIX “fear index” also surged, signaling high market stress.