Volkswacht Bodensee - Markets rattled as bank shares hammered

After sharp losses on Thursday, Wall Street's top indices had managed to peek into the green before regulators closed troubled Silicon Valley Bank, sending stocks tumbling into the red again.

But European equity markets ended sharply lower, with London stocks sliding 1.7 percent while both Paris and Frankfurt dropped 1.3 percent.

Asian stocks also posted steep losses.

Markets were rocked after SVB, which specialises in venture-capital financing, on Thursday announced a stock offering and offloaded securities to raise much-needed cash as it struggles with falling deposits.

In reaction, the firm's shares collapsed 60 percent in New York on Thursday and trading was suspended on Friday, before regulators announced they had closed the bank.

"Market sentiment has been weak due to the potential threats of SVB's collapse and contagion effect," said Naeem Aslam, chief investment officer at Zaye Capital Markets.

In London, shares in banking giant HSBC slumped 4.7 percent, while Standard Chartered fell 4.4 percent, Barclays 4.1 percent and Lloyds 3.5 percent.

In the eurozone, Deutsche Bank tanked 10 percent at one stage and closed down 7.4 percent, while French lender Societe Generale slumped 4.5 percent.

In the United States, shares in heavyweights Bank of America, Wells Fargo and Citibank initially continued to sink on Friday, with US Treasury Secretary Janet Yellen expressing "concern" about the situation and saying she was "monitoring" a few banks.

But they later rallied and stood higher in late morning trading. Bank of America and Citibank fell lower after the closure of SVB was announced.

"The debate today is whether SVB's issues are SVB's issues or the start of a bigger issue for the banking sector," said Patrick O'Hare at Briefing.com.

One of SVB's problems was that the quick jump in interest rates meant that securities they had bought were selling for significantly less.

That is a situation that probably holds true for other banks and could pose a problem if they need to raise funds.

- Fed rate hike expected -

US jobs data came in stronger than expected with 311,000 jobs created last month.

The numbers come days after Federal Reserve Chair Jerome Powell warned that the US central bank was prepared to speed up the pace of interest rate hikes and could lift rates higher than earlier anticipated if needed to rein in stubborn inflation.

The Fed has been closely eyeing the job market, with labour demand exceeding the supply of available workers.

The data was seen as all but ensuring the Fed will push up the pace of rate hikes.

"The key takeaway from the report is that it was still a strong report for this point in the Fed's tightening cycle... enough to keep a 50 basis points rate hike on the table for the March" meeting of the Fed's rate-setting committee, said O'Hare at Briefing.com.

But Fawad Razaqzada, market analyst at City Index and FOREX.com, said the situation has become more complicated for Powell given the tremors SVB had caused in the banking sector.

"The dilemma is that if he opts for more hikes, there is a risk that some regional banks might collapse, while not doing anything could exacerbate inflationary pressures again," he said.

The dollar fell sharply against its main rivals despite the likelihood of higher US interest rates.

- Key figures around 1630 GMT -

New York - Dow: UP 0.4 percent at 32,397.47 points

London - FTSE 100: DOWN 1.7 percent at 7,748.35

Frankfurt - DAX: DOWN 1.3 percent at 15,427.97

Paris - CAC 40: DOWN 1.3 percent at 7,220.67

EURO STOXX 50: DOWN 1.3 percent at 4,229.53

Tokyo - Nikkei 225: DOWN 1.7 percent at 28,143.97 (close)

Hong Kong - Hang Seng Index: DOWN 3.0 percent at 19,319.92 (close)

Shanghai - Composite: DOWN 1.4 percent at 3,230.08 (close)

Euro/dollar: UP at $1.0664 from $1.0581 on Thursday

Pound/dollar: UP at $1.2058 from $1.1925

Euro/pound: DOWN at 88.41 pence from 88.73 pence

Dollar/yen: DOWN at 135.06 yen from 136.15 yen

West Texas Intermediate: UP 1.5 percent at $76.85 per barrel

Brent North Sea crude: UP 1.6 percent at $82.87 per barrel

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J.Bergmann--BTB