More than £12.8bn was wiped off the value of the UK’s bank stocks as warnings over bad bank loans in the US spooked investors around the world. Shares in big global banks Barclays and Standard Chartered were down as much as 6.8pc and 5.4pc, respectively, after doubts emerged about the stability of regional banks in the US.
The FTSE 100, which is heavily weighted towards the financial sector, plunged by as much as 1.7pc in London. HSBC, the second most-valuable company on the FTSE 100, and rivals including Lloyds Bank and NatWest plummeted by around 2.5pc each.
Global stocks were hit hard overnight, with the Nikkei 225 dropping 1.5pc and the Hang Seng in Hong Kong declining by 2.5pc as they tracked heavy losses on Wall Street. The Dax in Germany fell by as much as 2.4pc and the Cac 40 in France dropped as much as 1.3pc.
Sentiment has been rocked by concerns over potentially hidden stress in the network of loans to businesses handed out by US banks, which have $4.5 trillion of exposure to loans from financial institutions outside the banking sector. Tensions have been heightened following the recent bankruptcies of auto lender Tricolor and auto parts maker First Brands, which triggered warnings from top financiers over lending standards in the $3 trillion private credit market.
However, the selloff eased in afternoon trading after Donald Trump signalled he would be easing trade tensions between the US and China. The US president confirmed that he planned to meet his Chinese counterpart in two weeks and dialled down his tariff threats.