Fears over the impact of high interest rates on credit quality exploded, sinking bank stocks and triggering a global market sell-off. The panic was ignited by two US regional banks reporting significant bad loans, raising questions about the underlying health of the economy.
Zions Bancorporation and Western Alliance saw their shares plummet after disclosing a combined $150 million in credit losses and legal actions over bad loans. This news revived memories of the 2023 SVB crisis, which was also linked to the high-rate environment.
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, marking its biggest weekly gain since the 2008 financial crisis. The VIX “fear index” also jumped, signaling high market volatility.
