Uncertainty on US banking woes could still impact the UK stock market
The UK stock market could see more pressure as traders become increasingly nervous about the health of the financial sector. Investors remain concerned about potential spillovers to other areas of the market and new failures.
Many banks saw their share price come under pressure as the sell-off hit larger institutions as well in the US and Europe. In the UK, HSBC in particular could remain under scrutiny after it took over the UK arm of failed SVB.
While the move has helped stop the panic to a certain extent, it exposes the bank to SVB’s issues and the attention of the markets. HSBC has announced plans to inject 2 billion pounds into SVB’s UK arm which could help secure operations in SVB.
Taking over SVB in the UK could also give HSBC better exposure to the local tech sector, opening a new front for the large bank in a dynamic sector. The acquisition could help the bank nurture a potential pool of future large clients as they have the capacity to grow strongly.
At the same time, the tax incentives and investment zones announced by the British government could boost the economy. Such initiatives could be necessary to prop up the lagging economy and stave off the impact of the banking sector’s woes.
It remains to be seen how central banks will react to the current confidence crisis in the banking sector and whether their interest rate decisions will lead to a calmer market.
In this regard, the publication of US inflation data today could have a strong impact on investors’ expectations regarding monetary policy and could drive even more volatility in stock market prices.
