Fears of a “domino effect” in the credit market grew as bad loan woes at two US banks followed the recent bankruptcies of Tricolor and First Brands. The news sparked a global market sell-off led by banking stocks.
The immediate trigger was news from Zions Bancorporation and Western Alliance, which are facing $150 million in combined bad loans. This sparked fears of a repeat of the 2023 SVB crisis.
The market reaction was global and severe. Bank stocks led the decline, with the European sector losing €37.4 billion. Major indices in Europe and Asia, including the FTSE 100, Dax, and Nikkei, all fell significantly.
The “wall of worry” among investors grew, leading to a flight to safety. Gold prices hit a record high of $4,378 an ounce. The VIX “fear index” also surged, signaling high market stress.