Jitters are rising about US regional banks, after two lenders disclosed issues with bad and fraudulent loans.
Regional banking stocks fell sharply yesterday, as Wall Street fretted about the state of credit markets.
Zions Bancorp announced it had a $50m charge-off over two bad loans from its subsidiary, California Bank & Trust in San Diego. Western Alliance said it was dealing with a fraudulent borrower.
Asia-Pacific markets have fallen today, led by a sharp sell-off in China.
China’s CSI300 index has dropped by 2.3%, while Japan’s Nikkei is down 1%.
European stock markets have also dropped like stones at the open.
The FTSE 100 index of blue-chip shares has tumbled by 131 points at the start of trading, a fall of 1.4%, down to 9,304 points.
Banks are among the top fallers, with Barclays down 4.7%, Standard Chartered losing 4.3% and NatWest off 3.1%. The asset manager ICG has lost 5%.
France’s Cac 40 has fallen 1.5%, Spain’s Ibex lost 1.2% and Germany’s Dax has lost 1.9%.
It has been a rough week for the US dollar, which is set for its biggest weekly drop in two and a half months.
Rising trade tensions between the US and China, and worries that the US economy may be weakening, have pulled down the greenback against other currencies this week.
The dollar index, which tracks its performance against a basket of currencies, has lost 0.9% so far this week – the biggest five-day drop since early August.
The dollar weakened after Donald Trump threatened new 100% tariffs on China in a row over its rare earth exports.
Concerns about the US economy – which is currently in an economic data blackout because of the government shutdown – is encouraging some investors to diversify away from assets such as the dollar, and Treasury bills, into harder assets such as gold.
Suspicions that US interest rates could be cut steadily in the months ahead are also weighing on the dollar.
The pound has climbed to its highest level against the dollar in more than a week this morning.
Sterling is up a quarter of a cent today at $1.3455, the strongest level since 7 October.
Today’s key events
• 10.35am BST: Bank of England’s chief economist, Huw Pill, speaking at ICAEW annual conference
• 3pm BST: IMF press briefing: regional economic outlook for Europe
We’ll be tracking all the main events throughout the day on our business live blog …
