Fallout from the lengthy period of high interest rates may be starting to show, as bad loan woes at two US banks ignited a global market panic. The news raised “broader questions over potential credit quality issues” in the economy.
Zions Bancorporation and Western Alliance, two regional lenders, saw their shares plummet after disclosing a combined $150 million in credit losses. This sparked fears of a repeat of the 2023 SVB crisis.
The banking sector was hammered worldwide. The pan-European banking industry lost over €37 billion in value, with major lenders like Barclays and Deutsche Bank falling sharply. This followed steep declines in Asian markets.
As anxiety surged, investors fled to safety. Gold prices soared to a record $4,378 an ounce, its best week since 2008. The VIX “fear index” also jumped, signaling high market volatility.