Europe midday: Banking shares dive after SVB reveals balance sheet woes
European were sharply lower on Friday after a sell-off on Wall Street and Asia, with banking stocks hammered after tech-focused bank SVB Financial announced plans to raise more than $2bn in capital to help offset losses on bond sales.
The pan-European Stoxx 600 index fell 1.68% in early deals with all major bourses lower and bank shares across the continent dominating the losers board.
In economic news official data out earlier showed that the UK economy returned to growth in January, raising hopes that a recession will be avoided.
GDP grew 0.3% on the month following a 0.5% contraction in December, coming in ahead of consensus expectations for 0.1% growth.
Meanwhile German inflation was unchanged last month with both energy and food prices remaining high.
According to the Federal Statistics Office, annual consumer price inflation was 8.7% in February, in line with both the initial estimate and consensus, and unchanged on January.
The harmonised index of consumer prices nudged 0.1 percentage points higher to 9.3%, also in line with consensus and earlier estimates.
Investors were also eyeing US payrolls data later in the day along with the unemployment rate and average earnings.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "A catalyst for upwards movement in global markets would be a weaker US jobs report today, which would act as a clear marker that core inflation could start to come down in the US.
"While the February jobs report is expected to show that hiring slowed from January’s large gain, a strong report will put further pressure on equities. The market could be spooked if it believes rates could reach the 6% mark, which would deepen recession fears and is a large reason we’ve seen US financials come under heavy pressure in recent trading."
SVB launched a $1.75bn share sale on Wednesday to bolster its balance sheet to plug a $1.8bn hole caused by the sale of a $21bn loss-making bond portfolio consisting mostly of US Treasuries. The portfolio was yielding it an average 1.79% return, well below the current 10-year Treasury yield of around 3.9%.
Reporting by Frank Prenesti for Sharecast.com