Wall Street higher as Biden says 'the banking system is safe' but FTSE closes in red
The FTSE 100 and European stocks finished in the red this Monday as the rescue of Silicon Valley Bank's UK arm (SIVB) led to a weak start to the week on the markets.
The FTSE 100 (^FTSE) lost 2.25% to close at 7,574 points, while the CAC 40 (^FCHI) in Paris tumbled 2.58% to 7,034 points. In Germany, the DAX (^GDAXI) fell 2.66% to 15,017.
Across the pond, US stocks started off the week with a sour sentiment before bouncing back after federal banking regulators took aggressive actions to stem the fallout of Silicon Valley Bank's failure.
The Dow Jones (^DJI) rose 0.47% to 32,060 points. The S&P 500 (^GSPC) rose 0.49% to 3,880 points and the tech-heavy NASDAQ (^IXIC) gained 1.13% to 11,264.
President Joe Biden addressed the nation on Monday regarding the collapse of Silicon Valley Bank. Biden said that “no losses will be borne by the taxpayers” and he assured customers that they would be protected. The president also vowed to ask Congress and the banking regulators to strengthen rules for banks.
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Biden explained that he instructed his team to protect US workers and small businesses and detailed their actions to protect customers' deposits and not put taxpayer dollars at risk, to hold those responsible accountable, and not to protect investors in the bank.
Back in London, HSBC (HSBA.L) bought the UK arm of Silicon Valley Bank (SVBUK), securing the deposits of more than 3,000 customers worth £6.7bn ($8bn).
The Treasury said the deal with HSBC involved no taxpayer money and the Bank of England said deposits were secure.
HSBC said it paid just £1 for SVBUK after the bank failed on Friday.
Silicon Valley Bank UK has today been sold to @HSBC.
This transaction has been facilitated by the @bankofengland in consultation with HM Treasury.
No taxpayer money is involved and customer deposits have been protected.
Find out more ⬇️https://t.co/Dmfjdx7duC
— HM Treasury (@hmtreasury) March 13, 2023
All SVBUK services will continue to operate as normal and customers should not notice any changes, the statement said.
"This acquisition makes excellent strategic sense for our business in the UK," HSBC said.
"It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally," Noel Quinn, HSBC group chief executive, said.
Silicon Valley Bank — which specialised in lending to technology companies — was shut down by US regulators on Friday in the largest failure of a US bank since 2008.
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UK chancellor Jeremy Hunt said: “Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK. This ensures customer deposits are protected and can bank as normal, with no taxpayer support.
“I am pleased we have reached a resolution in such short order.
“HSBC is Europe’s largest bank, and SVBUK customers should feel reassured by the strength, safety and security that brings them.”
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "After a number of offers from smaller banks, HSBC has agreed to scoop up the beleaguered UK arm of SVB, which should end the nightmare thousands of tech firms had been experiencing over the past few days.
"HSBC shareholders may have some concerns about the bank snapping up assets which have been under such a cloud of uncertainty, particularly the exposure to bonds, but HSBC says it expects a gain to arise from the acquisition.
"This will be hugely welcomed by the government, given the looming crisis risked overshadowing budget day, as a big tech sector bailout would not have been a good look when millions have been told there is little extra money to ease the cost of living crisis."
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Victoria Scholar, head of investment at Interactive Investor, said: "It means that SVBUK will avoid insolvency proceedings and its customers will be able to access deposits and banking services as normal from today. European markets look set to open higher as a crisis in the banking sector is averted for now."
Dom Hallas, executive director of Coadec, a lobby group representing UK tech start-ups, said Monday’s deal “saved hundreds of the UK’s most innovative companies".
The Government deserves huge credit. From the very top, to HM Treasury who understood the challenge and gripped it, to the PRA, to the huge number of civil servants who have likely not slept since Friday. They have saved hundreds of the UK’s most innovative companies today.
— Dom Hallas (@Dom_Hallas) March 13, 2023
Financial stocks were among the fallers in London, with Standard Chartered (STAN.L) losing 6.52%, investment manager abrdn (ABDN.L) off 3.41%, and Barclays (BARC.L) falling 5.79%.
Meanwhile, Brent crude (BZ=F) lost ground and was trading at around $82 per barrel amid concerns of further interest rate increases.
In Asia, Tokyo’s Nikkei 225 (^N225) lost 1.11% to 27,832 points, while the Hang Seng (^HSI) in Hong Kong gained 1.98% to 19,702. The Shanghai Composite (000001.SS) also gained ground, climbing 1.20% to 3,268 points.
Watch: Silicon Valley Bank fallout sees ripple effects across U.S. banking system, global markets
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