What a fickle world we live in. Last week, America’s sudden focus on the collapse of Silicon Valley Bank and the contagion that surrounded it in which a run on some smaller banks took place, claiming the existence of First Republic.
This caused some major North American indices to drop as investor confidence in bank stocks waned, and then just a matter of weeks later, when Swiss bank Credit Suisse collapsed, the investors on the European side of the Atlantic began to worry about the stability of the banking system and the FTSE 100 index in London experienced a £76 billion reduction in the value of the stocks listed on it.
This reduction flew in the face of predictions just one month ago which asserted that the FTSE 100 index, which is the basket of stocks of the United Kingdom’s most prestigious blue chip companies listed on the London Stock Exchange, may reach 8,000 points.
Instead, it dipped to around 7,300, largely due to lack of confidence in bank stocks.
Today, however, a sudden surge in value has taken place this morning as the FTSE 100 suddenly rose from 7,470 to 7,520, with this increase being led by, rather remarkably, bank stocks!
Traditional manufacturing stocks have remained strong on the FTSE 100, such as drinks manufacturer Irn Bru, as well as house building companies such as Bellway Homes which is set to make an earnings announcement imminently, however the banks in the United Kingdom have now demonstrated that they have not been subject to the toxicity that has taken place in some parts of the United States.
In fact, not only have British banks demonstrated their relative stability and have not been affected by any contagion, but the British divisions of struggling or insolvent American banks are on a road to being potentially saved.
Bank of England Governor Andrew Bailey is set to appear before MPs on the rescue of the UK arm of Silicon Valley Bank. The relief rally was also helped by the deal earlier this week for First Citizens bank to rescue Silicon Valley Bank.
Barclays. NatWest, Lloyds Banking Group and HSBC all made further gains, of between 1% and 2% each. Overall, the FTSE 100 added 52 points to 7523.60, a rise of 0.7%.
Since the rally that took place during the early hours, the upward direction has stabilized slightly, however this is a positive position and fears over banking have been quelled.
Onwards and upwards it is.
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