European shares continued to plunge on Monday as attempts to limit the fallout from the collapse of Silicon Valley Bank and the rescue of its UK arm by HSBC failed to reassure investors.
The Stoxx 600 index of regional equities was down 2.45%% at 1145 GMT with all major bourses lower, US futures were mixed after the US government said SVB depositors would have access to their cash on Monday.
In the UK, HSBC said it had bought the lender’s British operations after a night of frantic negotiations with government and Bank of England officials. Shares in the Hong Kong-based bank were down 2%.
US authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of SVB threatened to trigger a broader financial crisis.
The failed bank’s customers will have access to all their deposits starting Monday and regulators set up a new facility to give banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.
“HSBC shareholders may have some concerns about the bank snapping up assets which have been under such a cloud of uncertainty, particularly the exposure to bonds, but HSBC says it expects a gain to arise from the acquisition,” said Hargreaves Lansdown analyst Susannah Streeter.
“This will be hugely welcomed by the government, given the looming crisis risked overshadowing budget day, as a big tech sector bailout would not have been a good look when millions have been told there is little extra money to ease the cost-of-living crisis.”
In equity news, tech stocks rebounded on the rescue news, while banking shares were hammered.
Away from the SVC drama, insurer Direct Line fell sharply after saying it swung to a full-year loss as it took a hit from inflation, and warning that 2023 earnings will be impacted by higher-than-expected claims inflation in the motor business.
Reporting by Frank Prenesti for Sharecast.com
