Aust stocks lower at midday amid US bank collapse

Derek Rose | March 13, 2023

The local share market is sinking lower as traders weigh the fallout from the collapse of Silicon Valley Bank, a major United States financial institution.

At noon AEDT on Monday, the S&P/ASX200 index was down 42.3 points, or 0.59 per cent, to 7,102.4, while the broader All Ordinaries was down 45.4 points, or 0.62 per cent, to 7,302.8.

In the US, the Federal Reserve, the Treasury Department and Federal Deposit Insurance Corporation moved quickly to stem fears that the failure of SVB would ripple through the financial system, announcing shortly before the ASX opened that all depositors would have access to their funds on Monday.

But Betashares chief economist David Bassanese doubts the mess would be cleaned up quickly “now that the genie is out of the bottle”.

“For starters, it’s hard to believe there’s not a few more SVBs out there somewhere – especially now many more analysts will be looking for them,” he wrote. 

The United States’ 16th largest bank with $US200 billion in assets, SVB apparently failed because it had invested customer funds in fixed-rate securities that became worth less as interest rates rose. 

When tech customers it catered to felt the pinch of rising rates and withdrew their funds, SVB had to sell some of these bonds at a loss – and when that became public knowledge late last week, it quickly resulted in a bank run as depositors worried about the bank’s solvency. 

Mr Bassanese said any market mayhem might be enough to force the Fed to pause on raising rates again at its meeting next week, and could prompt the Reserve Bank to do as well in April.

That would be great news for bonds but a mixed bag for equities, Mr Bassanese said. 

“While any respite from Fed rate hikes will be good news, the lingering fear of financial contagion and a collapse in credit may more than offset this.”

At midday every sector in the local market except energy and mining were lower, with property the hardest hit, falling 1.8 per cent.

Each of the big banks were in the red, with ANZ down 1.4 per cent to $23.51, Westpac falling 1.0 per cent to $21.58, NAB down 0.9 per cent to $28.73 and CBA dropping 0.3 per cent to $95.215.

Macquarie had fallen 1.8 per cent to $181.37 and IAG, Suncorp and QBE were all down more than two per cent.

BHP was helping prop up the mining sector, with the Big Australian up 1.2 per cent to $45.53. 

Rio Tinto was up 0.3 per cent to $117.63 while Fortescue was down 0.2 per cent to $21.47.

Goldminers were doing well as the price of the safe haven metal jumped to a six-week high of $US1,875 an ounce amid the uncertainty. 

Newcrest had gained 3.4 per cent and Northern Star was up 5.9 per cent, with Evolution up 0.7 per cent even as it announced it would have to stop operations at its Ernest Henry copper mine in Queensland for an estimated six weeks because water from recent heavy rains had entered the mine workings.

Neuren Pharmaceuticals has soared 18.1 per cent to $9.06 after its North American partner, Acadia Pharmaceuticals, received US Food and Drug Administration approval for a treatment for Rett syndrome, a rare genetic disorder that mostly affects girls. Acadia has licensed the drug – which is not a cure but helps with symptoms – from Neuren for use in North America.