US stock markets experienced a rebound on Friday as concerns regarding bank loans and the escalation of the US-China trade war began to subside. The sentiment had turned sour the previous day after two regional US banks revealed issues with loans, prompting a sell-off in banking stocks. According to Fawad Razaqzada, a market analyst at City Index and Forex.com, the ongoing trade war uncertainty between the US and China, combined with sluggish global growth and stretched valuations, has added credit risk in US regional banks to the list of growing worries.
The fears surrounding the US banking sector have been escalating since September, when parts company First Brands and subprime lender Tricolor filed for bankruptcy, with the former owing billions to lenders. This week, Zions Bancorp disclosed a $50-million charge tied to commercial loans from its California arm, while Western Alliance stated that a borrower failed to deliver the promised collateral. However, on Friday, Zion Bancorp shares rose 5.5 percent after having plunged 13.1 percent the previous day, and other regional banks also recovered some of their losses.
Despite the recovery, analysts remain cautious, with some warning of a lack of transparency across private credit and private equity. David Morrison, an analyst at investment platform Trade Nation, suggested that the banking sell-off may be overdone, but also acknowledged the risk of more bad news to come. In Europe, London and Frankfurt were in the red in afternoon deals, while Paris rose after French Prime Minister Sebastien Lecornu survived two no-confidence votes the previous day.
The bank worries have led investors to seek safe-haven assets, with gold reaching another record high of $4,379.93 an ounce. The tensions between Washington and Beijing have also contributed to market unease, as the two countries exchanged salvos on trade and shipping. However, analysts noted that US President Trump eased some concerns by stating that the higher tariffs were “not sustainable” in a Fox Business interview.
The US stock market indices were in the green in morning trading, with the Dow rising 0.4 percent to 46,149.99 points, the S&P 500 up 0.2 percent at 6,640.78, and the Nasdaq Composite up 0.1 percent at 22,584.51. In contrast, the London FTSE 100 was down 0.6 percent, while the Paris CAC 40 rose 0.3 percent. The Tokyo Nikkei 225 closed down 1.4 percent, and the Hong Kong Hang Seng Index dropped 2.5 percent.
The market volatility is expected to continue, with investors keeping a close eye on the US-China trade war and the banking sector. The Federal Reserve’s decision on interest rates will also be closely watched, as expectations of a rate cut have provided some support to traders. As the global economy navigates these challenges, investors remain cautious, seeking safe-haven assets and monitoring the situation closely.