Stock markets subsequently fell around the world, with banking stocks seeing particularly large falls. The turmoil in banking stocks also triggered drops in yields for US Treasuries and Eurozone bonds, and gold prices renewed their recent rally as investors sought safe havens.
SVB launched a $1.75 billion share sale to try and shore up its balance sheet, but investors in its stock fretted over whether the capital raise would be sufficient given the deteriorating fortunes of many technology start-ups.
The bank’s stock price subsequently plunged by 60%, wiping out over $80 billion in value from its shares. Some start-ups then began pulling their money from the bank as a precautionary measure.
Reuters says SVB’s collapse is a sign that the “easy-cash era” is over, with higher interest rates dampening investors’ willingness to put money into early-stage or speculative businesses.
Corporate defaults are also rising amid the tightening monetary environment, with S&P Global saying Europe had the second-highest default count last year since 2009. It expects US and European default rates to reach 3.75% and 3.25%, respectively, in September, versus 1.6% and 1.4% a year before, with pessimistic forecasts of 6.0% and 5.5% not “out of the question”.
3. News in brief: Stories on the economy from around the world
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Argentina’s annual inflation rate exceeded 100% in February, marking the first time it has hit triple figures since a period of hyperinflation in 1991. Inflation hit 102.5% last month, with consumers seeing price changes on an almost weekly basis.
Turkey’s budget deficit widened to TRY170.56 billion ($9 billion) in February, as the government implemented measures to minimize the economic impact of last month’s earthquake. Economists say government spending on rebuilding and aid efforts could lift the deficit-to-GDP ratio above 5% this year, against a government target of 3.5% set in September.
EU finance ministers have agreed on broad principles for reform of Europe’s fiscal rules to better accommodate investment and give more flexibility to cut debt for high-debt countries. The rules are facing challenges because public debt has risen due to government support during the pandemic and cost-of-living crisis. Efforts to stop climate change also require huge public investment.