The VIX index, Wall Street’s “fear index,” surged by more than 22% as fresh anxieties over bad loans at US regional banks gripped investors. The spike, which brought the volatility gauge to its highest level since April, signaled a sharp increase in market uncertainty.
The jitters began after Zions Bancorporation and Western Alliance, two regional lenders, announced significant credit issues. Zions is writing off $50m, while Western Alliance is in a legal dispute over a $100m bad loan. Their shares plunged over 9% and 10% respectively.
This US-centric news sparked a global contagion. In Europe, bank stocks were routed, with over €37 billion wiped from their collective value. Barclays, Deutsche Bank, and Banco Sabadell all fell by around 6%. Asian markets, including the Nikkei and Hang Seng, also fell sharply.
The panic evoked memories of the 2023 SVB collapse, raising questions about the health of the economy after a long period of high rates. As investors fled risk, they poured into safe havens, pushing gold to a record $4,378 an ounce.