Failure of US bank spooks markets in London

The two biggest international banks on the FTSE 100 dropped more than 4.5%.

Shares in big banks suffered on Friday. (Ian West/PA) (PA Archive)

Malaise appeared to infect markets on Friday as some of London’s biggest banks and financial companies were spooked by the biggest failure of a US bank since the 2008 financial crisis.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said there was a “state of mild panic” surrounding shares in the financial sector amid the failure of Silicon Valley Bank, which was put under government control on Friday afternoon.

It resulted in big falls for the two biggest international banks on the FTSE 100, HSBC and Standard Chartered, which dropped more than 4.5%.

“The state of mild panic which has gripped the financial sector is proving hard to shake off, despite some evidence in today’s US jobs report that wage growth has cooled,” Ms Streeter said.

“Interest rate worries are still rattling investors who were spooked after steep bond-related losses were incurred by the small US tech-focused lender SVB, prompting it to try and raise emergency capital.”

The FTSE 100 closed down 1.7% at 7,748.35 points, a reduction of 131.63.

Markets were also down in the US where the S&P 500 had given back 0.7% of its value while the Dow Jones was trading down 0.4% shortly after trading ended in London.

France’s Cac 40 and Germany’s Dax indices both closed down 1.3%.

On currency markets the pound gained 1.1% against the dollar, trading at 1.205 by the close of play on stock markets.

In company news, housebuilder Berkeley Group said it was being “cautious” in a struggling UK housing sector, but kept its outlook for the year unchanged.

Sales have been around a quarter lower since September, it told investors on Friday. Shares dropped by 0.5%.

Shares in FirstGroup rose by the same amount after it announced that it expects profits for the year to outperform its previous targets.

Demand for bus travel has increased since September, the business said, and it is having an easier time finding drivers.

The biggest risers on the FTSE 100 were Endeavour Mining, up 26p to 1,650p, Fresnillo, up 9.6p to 722.2p, BT, up 1.05p to 148.35p, National Grid, up 6.5p to 1,050p, and SSE, up 5.5p to 1,731.5p.

The biggest fallers were Ocado, down 31.5p to 451.1p, Hargreaves Lansdown, down 47.0p to 788.2p, Admiral Group, down 101.0p to 1,881.5p, Rolls-Royce, down 7.9p to 150.1p, and HSBC, down 28.5p to 592.6p.