FTSE 100 extends fall as SVB contagion fears knock down banks

UK's FTSE 100 languished at two-month lows on Tuesday as fears of a contagion from the collapse of Silicon Valley Bank (SVB) continued to knock down bank stocks, while energy shares tracked declines in oil prices. The blue-chip FTSE 100 lost 0.5% after tumbling 2.6% on Monday, which was its biggest single-day drop in more than eight months.

UK's FTSE 100 languished at two-month lows on Tuesday as fears of a contagion from the collapse of Silicon Valley Bank (SVB) continued to knock down bank stocks, while energy shares tracked declines in oil prices.

The blue-chip FTSE 100 lost 0.5% after tumbling 2.6% on Monday, which was its biggest single-day drop in more than eight months. British banks dropped 1.2%. They sank 4.9% in the previous session — their worst one-day performance in over a year — on fears of a fallout from SVB's collapse hitting UK shores.

UK's banking shares have shed about 10% in the last three days. However, the declines are still lower than their U.S. peers, sliding more than 13% during the period. HSBC lost 1.5% after a report said that Europe's largest bank plans to inject 2 billion pounds ($2.43 billion) into the UK unit of SVB that it recently took over.

The energy sector slipped 1.6% as oil prices fell more than 1%. The more domestically-focussed FTSE 250 midcap index also fell 0.3%.

Investors will be eyeing U.S. inflation data due later in the day, a crucial metric in gauging where the U.S. Federal Reserve stands on further monetary policy tightening ahead of its interest rate decision next week. "I think SVB and the impact it's having in the financial world is likely the breaking point for the Fed in terms of how markets are concerned," said Daniela Hathorn, senior market analyst at Capital.com.

Meanwhile, data showed growth in pay in Britain lost pace in the three months to January. Investors put a 40% chance on the Bank of England pausing its run of rate hikes at its March meeting next week after the failure of SVB. ($1 = 0.8230 pounds)

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