UK stock market hit by nerves over US banks

The UK stock market fell sharply after warnings from two US banks triggered a widespread sell-off in global shares.

Western Alliance Bank and Zions Bank, two regional US lenders, said on Thursday they had been hit by bad or fraudulent loans, raising fears of trouble in the banking sector.

Share prices of some of Britain’s biggest banks, including Barclays and Standard Chartered, fell by more than 5%. The FTSE 100 index of leading shares fell around 1.5% at one point before recovering slightly.

Stock market indexes around the world, including Germany’s Dax and France’s Cac 40, also fell.

On Thursday, Zions Bank announced it would write off $50 million in losses from two loans, while Western Alliance said it had filed a lawsuit alleging fraud.

“Pockets of the U.S. banking industry, including regional banks, have caused concern in the market,” said Russ Mould, chief investment officer at AJ Bell.

“Investors began to question why there were so many problems in a short period of time and whether this pointed to poor risk management and lax credit standards.”

“Investors are spooked,” he added, and said that although there was no evidence of any problems with UK-listed banks, “when problems arise elsewhere in the sector investors often react immediately”.

Bank stocks in Europe also took a hit; Germany’s Deutsche Bank lost more than 5% and France’s Societe Generale lost 4%.

Asian markets fell early Friday. While Japan’s Nikkei index closed with a 1.4% loss, Hong Kong’s Hang Seng Index closed the day with a 2.5% decrease.

Investors were nervous following the failure of two high-profile US firms, auto loan company Tricolor and auto parts maker First Brands.

Those failures have raised questions about the quality of deals in what is known as the private credit market, where companies arrange loans from nonbank lenders.

This week Jamie Dimon, the boss of JPMorgan Chase, the largest US bank, warned that these two failures could be a sign of more to come.

“My antenna goes up when things like this happen,” he told analysts. “I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned about this.”

There are also warnings that the increase in AI investments is creating a bubble in the US stock market. Including Mr. Dimon – Leading to fears that stocks are overvalued.

Market turmoil on Friday sent the price of gold to a new record of $4,380 per ounce as investors sought a safe haven for their money.

Another measure followed closely by the market, the VIX volatility index, sometimes called the “Fear Index,” reached its highest level since April.