Analysts are warning of “storm clouds gathering” over global markets as new fears over US bank stability added to a growing “wall of worry.” The concerns, which include stretched AI valuations and geopolitical tensions, sparked a broad sell-off.
The immediate trigger was news from two US regional banks, Zions and Western Alliance, which revealed $150 million in bad loans. This raised questions about the underlying health of the economy after a prolonged period of high interest rates.
The market reaction was severe. Bank stocks were routed, with the European sector losing €37.4 billion. Barclays and Deutsche Bank plunged. Indices in Europe and Asia, including the FTSE 100, Dax, and Nikkei, all fell.
In a sign of deep investor anxiety, the VIX “fear index” surged over 22%. Investors fled to the safety of gold, pushing the precious metal to a new record high of $4,378 an ounce.