(Bloomberg) — UK stocks erased their year-to-date gains amid a slump in banking and commodities shares and as Chancellor Jeremy Hunt’s budget did little to boost market sentiment.
The FTSE 350 index dropped as much as 3.2% on Wednesday, the most since June as lenders including HSBC Holdings Plc and Barclays Plc plunged with global peers in the wake of turmoil at Credit Suisse Group AG and continued fallout from Silicon Valley Bank’s collapse. Oil and industrial metals slumped, dragging down Shell Plc, BP Plc, Glencore Plc and Rio Tinto Plc.
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“UK and EU banks’ declines are also reflecting going concern fears about Credit Suisse,” Tineke Frikkee, head of UK equity research at Waverton Investment Management, said by email. “Rising financial concerns will probably keep markets in a risk-off mode in the short term,” she added.
UK shares had rallied since mid-October, driven higher by a bounce in banks on bets that higher rates will boost their revenues and as energy stocks remained a popular choice on strong commodities and buybacks. The FTSE 350 benchmark had gained 7.5% from the start of the year through mid-February, though it had underperformed global peers.
READ: Budget Day Dawns for UK Stock Traders Still Shaken by SVB
Meanwhile on Wednesday, Hunt’s budget measures — including energy support for households and added defense spending — were already priced into the market after being reported earlier by the media. Economists expect the chancellor to announce more significant stimulus in the autumn, ahead of next year’s general election.