Global Markets Plunge Amid Prolonged U.S. Government Shutdown
(MENAFN) Global financial markets experienced a widespread downturn as the United States federal government shutdown entered its 17th consecutive day.
The situation was worsened by escalating apprehension surrounding the banking industry, particularly after multiple national banks reported loan losses tied to fraudulent activity.
Two major institutions, Zions Bancorp and Western Alliance, disclosed instances of fraud in specific loans, intensifying doubts about the health of their lending portfolios.
Zions Bancorp identified discrepancies in two commercial loans and declared a $50 million loss to the U.S. Securities and Exchange Commission (SEC), which led to its stock plummeting by 13.1% on Thursday.
Meanwhile, Western Alliance saw a 10.8% decline in its share price after initiating legal proceedings against a borrower over allegations of fraud, as detailed in its SEC filing.
The KBW Regional Banking Index dropped by 6.3% on Thursday, underscoring the sector-wide impact. Prominent financial entities like JPMorgan Chase and Jefferies Financial Group were not immune, with their stock values decreasing by 2.3% and 10.6%, respectively.
This sharp downturn in financial equities had a notable effect on overall investor confidence and the broader equity markets.
Investor anxiety surged as the CBOE Volatility Index (VIX)—often referred to as the market’s "fear gauge"—rose sharply by 23%, reaching 25.31, its peak level in half a year.
Analysts attributed this spike not only to instability in the banking sector but also to renewed trade friction between the U.S. and China.
Tensions escalated after President Donald Trump threatened additional tariffs in response to Beijing’s move to curb rare earth mineral exports.
These developments, coupled with the ongoing federal impasse, further heightened economic uncertainty.
In response to mounting risks, safe-haven assets saw significant movement. Gold prices surged to an all-time high of $4,379.42 per ounce before settling slightly lower at $4,366, marking a 0.95% increase on Friday.
Concurrently, the yield on the U.S. 10-year Treasury fell to its lowest point since April 7, closing at 3.96%, driven by robust demand. Meanwhile, the U.S. Dollar Index continued its downward trend for a fourth consecutive session, slipping 0.1% to 98.2.
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