European bank shares dropped dramatically this morning after SVB Financial Group’s announcement it needs to raise up to $1.75 billion, spreading fears across the globe. Bank of America, Citigroup and other big banks also fell sharply.
Global stock markets and Wall Street futures fell on Friday ahead of a US job market update amid unease about possible further interest rate hikes.
Markets in London, Shanghai, Frankfurt and Tokyo declined. While, oil prices were lower.
Wall Street’s benchmark S&P 500 index fell on Thursday by its biggest one-day margin this year after Federal Reserve Chair Jerome Powell warned rates might be raised faster than expected to cool stubbornly high inflation.
Traders looked ahead to US government hiring data due out Friday after other indicators showed the job market has stayed strong despite repeated interest rate hikes. That is good for workers, but Fed officials worry rising wages might fuel inflation.
That might lead to more rate hikes to dampen business activity and hiring.
Rubeela Farooqi of High Frequency Economics said in a report Fed officials were “clearly messaging that rates will move higher”.
The Fed’s inflation-fighting policies risk slowing the economy too much and pushing it into a recession, while also going too far in softening a strong labor market and putting many people out of work.
A US government report on Thursday showed that the number of Americans applying for unemployment benefits last week jumped by the most in five months, but layoffs remain historically low.
Yields on the two-year Treasury, which tends to track expectations for future Fed action, eased to 4.87 percent from about 5.05 percent just before the unemployment report’s release. It had been hovering at its highest level since 2007.
The unemployment data follows a report on Wednesday showing that the number of job openings advertised across the country last month was higher than economists expected.
A big concern within the labour market reports for the Fed and Wall Street is the pace of wage growth.
Strong wage gains are good for workers struggling to keep up with high inflation, but they could also keep pushing inflation higher, making it harder for the central bank to fight high prices.
