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By Amanda Cooper
LONDON, March 14 (Reuters) – Global stocks tumbled on Tuesday as the looming U.S. banking crisis led investors to scale back expectations of an interest rate hike, even ahead of key data on the news. inflation they will encounter later in the day.
* Just a week ago, investors were reeling from a reality check that led many to speculate that rates around the world were likely to rise much more and stay that way for longer than expected.
* In less than a week, three US banks collapsed. In particular, the collapse of technology bank Silicon Valley Bank (SVB) was the one that shook investor confidence the most and sparked a run into safe-haven assets such as bonds and gold.
* Bank stocks around the world lost hundreds of billions of dollars in days, while the government bond market saw one of its biggest rallies in decades.
* The MSCI global equity index fell 0.5%, largely due to sharp declines in Asian stocks, while European stocks fell 0.1% on their third day of declines.
* The yield on short-term US Treasuries rose 14 basis points to 4.17%, but as it posted its biggest daily decline since 1987 on Monday, it was still at its lowest level in six months.
* Many drew parallels to the 2008 financial crisis, when financial market stress indicators soared and stock markets plunged. However, Kit Juckes, chief currency strategist at Societe Generale, said the current situation is much more like the US savings bank crisis of the 1980s, in which hundreds of small banks went bankrupt when the Federal Reserve raised rates to control inflation.
* SVB, the 16th largest bank in the United States at the end of last year, has been the largest bankrupt lender since 2008. Details of its abrupt collapse remain unclear, but the Fed’s sharp rate hike l Last year, which tightened financial conditions in the “startup” sector, in which it was a major player, seems to have figured prominently.
* Overnight, the VIX volatility index, dubbed Wall Street’s “fear gauge”, approached six-month highs and other indicators of market stress showed early signs of concern . An index of bond market volatility – the ICE BofA MOVE Index – hit a 14-year high at Monday’s close.
* On the other hand, the drastic revision in rate expectations in the United States sent the value of the dollar down 1.5% last week, helping to revive the purchase of gold, a traditional refuge which gained 5 % in the last week alone, up around $1,900 an ounce.
* The greenback paused on Tuesday, rising 0.7% against its Japanese counterpart at 134.11 yen and 0.3% against the euro at $1,070.
* Nerves weighed on crude oil prices and Brent futures fell below $80 a barrel.
(Reporting by Tom Westbrook; Editing in Spanish by Carlos Serrano)