UK markets brace for big bank selloffs

UK markets brace for big bank selloffs

LONDON Reuters -- British markets were roiled by concerns about European banks after shares in Credit Suisse fell 30%, showing little reaction to Chancellor Jeremy Hunt's budget on Wednesday.

The pound went up slightly against the euro as Hunt delivered the budget, in which he said Britain's official forecaster expected the economy to avoid the recession this year.

Hunt said the economy was likely to shrink by 0.2% in 2023, compared to the previous forecast for a 1.4% contraction. He said that inflation was expected to fall to 2.9% by the end of the year.

As Hunt talked, the euro fell to a low of 87.25 pence. It was down 1.14% at 87.29 pence.

The euro had already fallen sharply, with a drop in European bank stocks spooking investors who were already on edge since the collapse of the U.S. lender Silicon Valley Bank late last week.

After a key backer said it could not provide the company with more financial assistance, Swiss bank Credit Suisse's shares fell 28.35%.

The yields on British government bonds, or gilts, were down sharply on the day as part of a wider investor push into safe-haven assets, but were barely reducing some of their declines as Hunt spoke.

The yield on the 10 year gilt was down 17 basis points to 3.311% last year.

Britain's FTSE 100 stock index was down 3.05%, with financial companies leading the decline. Insurer Prudential was down 11.96%, while Barclays was down 8.65%.