Global financial markets continued their slump early on Tuesday as shockwaves from the collapse of Silicon Valley Bank continued to weigh on trading.
Efforts by US President Joe Biden late on Monday and other policymakers did little to turn sentiment around for cautious investors.
He said: “Americans can have confidence that the banking system is safe. Your deposits will be there when you need them.”
Nevertheless, he promised to look at new banking regulations to make it less likely that such a large bank failure can happen again.
Banking shares in Asia – where the first global markets open – continued their decline on the opening bell on Tuesday, with a particularly poor start for Japanese firms.
The Nikkei 225 in Tokyo fell 2.2%, while the S&P/ASX 200 closed 1.4% down, representing a third consecutive day of decline.
The FTSE 100 is likely to fall by around 0.3% lower at the start of trading, according to IG.
On Monday, the leading London index closed 2.58% lower, with more than £50 billion wiped off the value of the stock exchange over the course of the day.
Ipek Ozkardeskaya, senior analyst at Swissquote, said: “Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week.”
The analyst added that attention will now turn towards Tuesday’s US consumer price index (CPI) inflation reading, amid worries that the banking turbulence could alter the path for interest rates.
“There is now a massive lack of consensus in the market regarding what the Fed should do, and what the Fed will do,” she said.
“Some think that, if today’s inflation data is not sufficiently soft, the Fed should continue hiking by 50bp (basis points).”