Europe open: Shares slump on US banking fears

(Sharecast News) - European shares slumped at the open on Friday, following sharp declines on Wall Street over fears of a credit crisis in the US banking sector.

The pan-regional Stoxx 600 index had fallen 1.43% to 563 by 0815 BST. Germany's DAX was down almost 2%, France's CAC declined 1.5% and Britain's FTSE 100 tumbled by 1.4%.

Two US banks on Thursday disclosed problems with bad and fraudulent loans, raising concerns that this situation may be more widespread.

"There are increasing signs of storm clouds gathering over markets, with little relief from the building wall of worry," said Interactive Investor head of markets Richard Hunter.

"Already grappling with stretched stock valuations in the AI space, an unresolved government shutdown and a deteriorating relationship between Beijing and Washington, investors were exposed to a new source of concern in the form of lending practices and bad loans for US regional banks."

"Of themselves, the credit losses announced by two regional banks were limited and seem to be contained. While there are hopes that this could be an isolated incident, the episode brought back unwelcome memories of the Silicon Valley Bank collapse in 2023 and, with several regional banks yet to report, investors are on high alert."

Predictably, bank shares were under pressure, with Deutsch Bank, Barclays, Banco de Sabadell, Banco Santander, Standard Chartered and Societe Generale all falling.

Defence stocks also tumbled on the prospect of peace talks to halt the war on Ukraine by neighbouring Russia as US President Donald Trump prepared to meet Ukraine leader Volodymyyr Zelensky. Leonardo, Renk, Rheinmetall, Babcock and Hensoldt declined on the news.

Reporting by Frank Prenesti for Sharecast.com