FTSE 100, DAX 40 and S&P 500 drop on banking sector woes

FTSE 100 drops to six-week low on worries about the banking sector

Worries about the solvency of Sillicon Valley startup bank SVB Financial and the liquidation of crypto bank Silvergate following a mass withdrawal of deposits after the collapse of the FTX exchange have led to strong global risk-off sentiment with the FTSE 100 slipping to six-week lows close to 7,750.

Further down the mid- to late January lows can be found at 7,725 to 7,708 which are expected to offer support on Friday.
Minor resistance can be spotted at the 7,811 23 January high and major resistance between the mid- to late February lows at 7,850 to 7,854.

DAX 40 slips towards its October-to-March uptrend line

The DAX 40, although also coming off, has to a large degree been spared the panic surrounding the global banking sector with investors worrying that higher interest rates are pressuring bank balance sheets due to a rise in borrower defaults.

The index is seen slipping back towards its October-to-March uptrend line at 15,330 which may offer support on Friday around the publication of US unemployment data. Were it to be slipped through, the January peak at 15,272 would be in sight.

Immediate resistance can be spotted at the 1 March high at 15,480 and further resistance at the 23 February high at 15,556 as well as at the mid-February high at 15,552. Below 15,272 sits good support between the late February and early March lows at 15,184 to 15,145.

S&P 500

The S&P 500 slid through its 200-day simple moving average (SMA) at 3,935 to levels last traded in early January as cracks appear in the banking sector ahead of Friday’s US Non-Farm Payrolls data release.

SVB Financial Group’s share price declined by 60% after the launch of a $1.75 billion share sale on Wednesday to shore up its balance sheet and as the Silicon Valley Bank had to reassure its shareholders that their money was safe, provoking an over $80 billion drop in the value of bank shares and pushing US equity indices lower.

The now breached October-to-March uptrend line at 3,944 and 200-day SMA at 3,935 do not bode well for the bulls since unless a bullish reversal were to take the S&P 500 back above these on a daily chart closing basis, the December low at 3,764 will represent the next downside target.

Near-term support comes in at the 19 January low at 3,886 while resistance can be spotted at 3,935 to 3,944.