Global stocks slide on US regional bank jitters

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Global stock markets fell on Friday, led by a sell-off in bank shares as investors worried about the health of regional lenders in the US.

S&P 500 futures were down 1.3 per cent in early European trading, deepening the previous day’s losses that came after two American lenders, Western Alliance Bank and Zions Bank, disclosed that they were exposed to alleged fraud by borrowers.

The Vix index of short-term volatility in US stocks, often called Wall Street’s “fear gauge”, climbed to its highest level since April at 28 points.

The selling spread to Europe, with bank shares leading a 1.6 per cent decline in the Stoxx Europe 600 index, while safe haven government bonds rallied.

The disclosures by Western Alliance and Zions fuelled a 6.3 per cent drop in the KBW regional banking index on Thursday, and added to jitters over the health of credit markets following the failures of auto lender Tricolor and car-parts maker First Brands. That has led traders to reduce risk amid broader worries of a bubble in artificial intelligence stocks that has powered US markets to a series of record highs.

Markets were “sensitive to any potential cause of breakdown in banks or credit. Everything is so overvalued,” said Pooja Kumra, a rates strategist at TD Securities.

The 10-year US Treasury yield, which moves inversely to prices, fell 0.02 percentage points to 3.96 per cent, its lowest since April.

Oil futures also declined, with international benchmark Brent crude falling 1.1 per cent to $60.44 a barrel.

Gold extended its recent record rally, climbing 0.5 per cent to $4,347 a troy ounce. The metal has risen 8 per cent this week, driven by mounting economic worries and hopes for further Federal Reserve interest rate cuts.

Asian markets also declined on Friday, with Hong Kong’s Hang Seng index shedding 2.5 per cent and mainland China’s CSI 300 index falling 2.3 per cent. Japan’s benchmark Topix fell 1 per cent.