Plummeting bank stocks lead global selloff as fear of private credit ‘contagion’ moves across equities and the dollar

Core Points - Global markets experienced a sharp decline following the disclosure of fraudulent loans by two U.S. regional banks, raising concerns about the private credit market [1][4] - The VIX fear index surged over 30%, indicating heightened market volatility and investor anxiety [1][2] - The exposure of Zions Bancorporation and Western Alliance Bank to potentially fraudulent loans of $50 million to $60 million triggered widespread sell-offs in bank stocks [3][4] Market Reactions - 74 American bank stocks collectively lost $100 billion in market capitalization, with the S&P 500 dropping 0.63% [4] - The S&P Regional Banks Select Industry Index fell by 6.3%, marking its worst decline since April [4] - European markets, including the Stoxx 600 and FTSE 100, also saw losses exceeding one percentage point immediately after opening [5] Broader Implications - The contagion effect is impacting other risk assets, reflecting ongoing sensitivity to regional bank issues, reminiscent of the SVB collapse in 2023 [6][7] - The dollar weakened by 0.08% in response to these developments, losing 0.73% against foreign currencies over the past five days [6] - Analysts suggest that the current risks, while appearing more isolated than in 2023, could indicate a deteriorating U.S. business environment and credit quality [7]