Silicon Valley Bank collapses as contagion sends global stocks reeling

The biggest US banking failure since the financial crisis has triggered a sell-off in global markets amid fears about contagion.

US regulators last night took control of California’s Silicon Valley Bank after a run on the bank forced it to put itself up for sale.

The intervention triggered panic in global markets, with the FTSE 100 closing down 1.67pc in London. Billions were wiped off the value of Barclays and HSBC as investors scrambled to figure out how widespread the problems that hit Silicon Valley Bank could be.

The tech-focused lender was worth $44bn at its peak but was forced into the arms of regulators after suffering losses on its investments, which triggered a crisis of confidence.

Silicon Valley Bank told staff to work from home until further notice as customers pulled funds from their accounts under pressure from investors.

Officials last night took control of the bank in a move that threatens to wipe out billions in deposits, hours after shares were suspended.

The Bank of England is understood to be monitoring the situation and making contact with UK-headquartered banks, although it believes that the largest lenders are resilient.

Silicon Valley Bank’s British subsidiary works with tech companies and other growth businesses, offering business accounts, loans and advisor services.

Hundreds of British businesses are understood to have been blocked from withdrawing their funds after Silicon Valley Bank UK refused to waive a 30-day notice period on withdrawals that affects up to half of its customers.

Executives have been seeking to reassure customers that it is immune to its US parent’s problems. Silicon Valley Bank’s UK entity, which is owned by the US parent but whose assets are ring-fenced, said it was a “standalone independent banking institution that is regulated and governed by the Prudential Regulation Authority (PRA)”.

Many start-ups were seeking to take out their cash imminently, fearing contagion. Venture capital firm Hoxton Ventures said it had advised companies to take out several months of operating costs in case funds are frozen.

The Bank of England said it was in touch with the bank and other regulators. A spokesman said: “Silicon Valley Bank UK is supervised and authorised by the Prudential Regulation Authority. The UK bank has no personal retail depositors. We are aware of the issues impacting the firm and are closely engaging with it and overseas regulators.”

California’s Department of Financial Protection and Innovation said it had “taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency”. The takeover means that customers’ deposits are only protected up to $250,000 if the bank cannot find a suitable buyer. It is the second largest banking collapse in US history by assets after Washington Mutual, which failed in 2008.

Confidence in the bank had collapsed after it revealed on Wednesday that it had lost $1.8bn on the sale of $21bn worth of bonds and mortgage-backed securities. The lender said it planned to raise billions to cover the losses.

Regulators moved in after Silicon Valley Bank suspended Wall Street trading following a collapse in the company’s share price that forced it to abandon those plans and sell itself. Shares had fallen by 60pc on Thursday as technology businesses rushed to withdraw their funds under pressure from influential venture capital investors.

The bank’s loss-making investments were made during the pandemic, when interest rates hit historic lows. Their value has dropped as a result of rising rates in recent months.

The revelation sent tremors through the financial system amid concerns that other banks could be vulnerable to similar discounting.

US employment numbers released on Friday suggested that the Federal Reserve may have to continue raising interest rates to combat inflation.

Some 311,000 jobs were created in February, which was well above the consensus of 205,000. However, the figure marks a slowdown from an unusually sharp rise of 504,000 in January.

In London, HSBC, Standard Chartered and Barclays were among the biggest fallers on the FTSE 100, falling by between 3pc and 6pc.

In Europe, Deutsche Bank and Société Générale fell 6pc and 5pc respectively, while Credit Suisse dropped 4.7pc to a new record low.

Bank of America, whose shares slumped on Thursday as the crisis around Silicon Valley Bank grew, fell a further 5pc at the open before paring back the losses. Goldman Sachs fell by 2.5pc.

There are concerns that customers may start to withdraw funds across the banking system, forcing some lenders to either offload bonds at a loss or pay higher interest rates to keep customers.

Molten Ventures, a London-listed technology investor, fell by 11pc. The company has a £150m debt facility with Silicon Valley Bank and JP Morgan, and many of the companies it invests with are likely to have dealings with the bank.

Molten Ventures said: "We have a well diversified and well funded portfolio with an appropriately wide range of banking relationships and counterparties. We will of course keep a close eye on the situation but we have no reason to think this should have any material impact on our own financial position or that of our portfolio companies.”

Meanwhile, the pound surged against the dollar as a cocktail of factors including the crisis affecting global banks helped boost sterling.

The currency jumped by 1.5pc as fears about a UK recession subsided after strong January GDP numbers and investors sought an alternative safe haven to the dollar.

07:09 PM

Have a good weekend!

Alright, that's all from us. We'll be back Monday, but here's our latest stories to ease you into the weekend:

• Rolls-Royce mini-nukes project at risk | UK ministers prepare beauty parade of rival bidders

• BP takes £1.2bn hit on German refinery amid race to net zero | Asset write down comes amid changes in predicted demand for fossil fuels

• The EU has lost its grip as an economic superpower | The bloc’s clout is gone – and it is difficult to see how it will claw it back

06:36 PM

Facebook-owner working on potential Twitter rival

Facebook owner Meta has confirmed rumours that it's working on a new social media platform designed to share "text updates", which could rival Twitter.

A Meta spokesman said:

It comes as Twitter has faced months over disruption - from outages to layoffs - since being bought by Elon Musk last October.

06:19 PM

SVB collapse could spark mass layoffs in tech industry

SVB's failure could result in further mass layoffs across the tech industry, commentators have warned.

The lender's collapse has further shaken investor confidence, already reeling from the demise of crypto bank Silvergate.

Michael James, managing director of equity trading at Wedbush Securities explained:

05:22 PM

Silicon Valley Bank collapses

Silicon Valley Bank has collapsed as US banking authorities seized control of its assets to protect depositors after a dash to withdraw funds sparked global stock market turmoil.

The California Department of Financial Protection and Innovation has closed SVB and appointed the Federal Deposit Insurance Corporation as receiver of the funds.

The lender's 17 branches will physically reopen Monday under control of the Deposit Insurance National Bank of Santa Clara, a new entity established by the FDIC.

However, the FDIC only guarantees SVB customers access to insured deposits of up to $250,000. Deposits above that limit are uninsured.

Uninsured depositors will be given an “advance dividend” within the next week, alongside a receivership certificate for the remaining amount of their funds, said the FDIC.

Those with uninsured deposits may receive future dividend payments as the FDIC sells SVB’s assets, the agency added.

SVB had around $209bn (£173bn) in total assets and nearly $175.4bn in total deposits at the end of last year.

It comes after a dash to withdraw funds at troubled lender Silicon Valley Bank has shaken confidence in world banking stocks, hitting markets and leaving investors nervous.

Silicon Valley Bank shares plunged as much as 69pc before markets opened in New York before trading was halted earlier today.

Its parent company SVB Financial revealed on Thursday it had realised losses of $1.8bn on bonds as a result of last year's interest rate rises, leaving it trying to raise capital.

Investors then began selling off banking stocks around the world, as they hold large amounts of government bonds, which lose value when interest rates go up.

SVB Financial is now in discussions to sell itself to large financial institutions, CNBC reported.

It means that uninsured balances above $250,000 are at risk:

05:12 PM

Bond yields retreat as investors fear SVB is systemic issue

Yields on US Treasuries have retreated as investors flock to safety amid

The benchmark 10-year yield has fallen 18 basis points, while the two-year yield has decreased 19 basis points.

This suggests a "flight to safety" among investors who fear that more banks could soon find themselves in a similar position as SVB, said Patrick O'Hare, chief market analyst at Briefing.com.

He added:

04:39 PM

FTSE 100 shrinks after bank run

The internationally focused FTSE 100 index has closed 1.67pc lower at 7,748.35.

Billions were wiped from Britain's blue-chip index following a rout on banking stocks.

HBSC's share price dropped by 4.59pc, dragging the index down by nearly 29 points. Meanwhile, Barclays dropped 3.67pc, Lloyds shed 3.47pc and Natwest dipped 2.59pc.

Financial services companies Hargreaves Lansdown and Legal & respectively lost 5.63pc and 3.94pc.

Today's session has left the FTSE 100 around 300 points below last month's record high of 8,047.06.

Meanwhile, the domestically-focused FTSE 250 has finished down 1.7pc at 19,357.46.

04:35 PM

US Treasury Department monitoring SVB collapse 'very carefully'

The US Treasury Department is monitoring SVB Financial “very carefully” and exploring whether it will spread into a more systemic issue, according to a government official.

White House economic advisor Bharat Ramamurti told CNBC:

SVB Financial's shares fell by as much as 69pc in premarket trading before being halted.

04:19 PM

Offshore workers across Shell and Harbour Energy to strike over pay

Offshore oil and gas workers across Apache, Shell, and Harbour Energy will strike imminently over pay, Unite has confirmed.

The trade union has said that 150 members of Sparrows Offshore Services have agreed to industrial action across over 20 oil and gas platforms.

The strikes threaten to shut down dozens of platforms in the UK Continental Shelf.

This is in addition to the 50 Sparrows offshore contractors striking against BP in a separate dispute over pay and conditions, announced last week.

Strikes against BP will begin later this month and last until June.

Unite general secretary, Sharon Graham, said:

04:13 PM

Handing over

What a day it has been to end the week. But we are not quite finished yet. I am signing off and Adam Mawardi will keep you updated as he monitors things from here.

04:10 PM

Run on Silicon Valley Bank has 'knock-on effect on wider banking system'

Unease is spreading across the financial world as concerns about the stability of Silicon Valley Bank shake investors.

Venture capitalists including Peter Thiel's Founders Fund has started to advise start-ups to withdraw their money.

Coatue Management, Union Square Ventures and Founder Collective also advised start-ups to pull cash.

Canaan, another major VC firm, told firms it invested in to remove funds on an as-needed basis, sources told Bloomberg.

Rick Seehra, prudential lead at Bovill, said:

03:58 PM

SVB tells staff to work from home

SVB Financial Group employees have been told to work from home until further notice.

Essential and branch employees are excluded from the bank’s request.

"SVB is undergoing a series of conversations that have not been concluded yet to determine next steps for the company," the bank said in a memo seen by Reuters.

It follows reports that SVB Financial has entered discussions to sell itself to large financial institutions amid a global stock market selloff.

03:42 PM

HS2 risks being 'dismembered,' peers told

HS2 is at risk of being "dismembered" and never resurrected after further delays were announced by the Government, peers have heard.

Cost-saving measures mean the construction of the Birmingham to Crewe leg of HS2 will be delayed by two years and services of the high speed rail line may not enter central London until the 2040s.

The Government was criticised in the House of Lords for the decision and warned the project could struggle to recover.

Conservative whip Lord Davies of Gower, speaking on behalf of the Government, accepted the move was "disappointing" and would cause difficulties in the supply chain for contractors.

He said: "In the current economic climate the Government is taking an honest and very pragmatic view and we have to realise the circumstances we find ourselves in."

But Conservative peer Lord Moylan, a former deputy chairman of Transport for London, said:

03:16 PM

Pound surges as recession fears ease

Away from the turmoil on the stock markets, the pound has had a superb day after Britain's economy grew by more than expected in January, allaying fears of a recession.

The Office for National Statistics said the UK's economy expanded 0.3pc over the course of the month, after a drop of 0.5pc in December.

The pound has risen 1.5pc today against the dollar to be worth nearly $1.21.

Against the euro, it is up around 0.5pc, making a euro worth about 88p.

Matthew Ryan, head of market strategy at Ebury, said:

03:08 PM

Revolut backer plunges over Silicon Valley Bank funding fears

Shares in a technology fund that counts the banking app Revolut among its investments have plunged by almost a fifth after the panic over the US Silicon Valley Bank spread to the UK.

Technology editor James Titcomb has the latest on the company which has suffered the biggest losses on the FTSE 250 today:

Read how UK executives were forced to reassure customers about the health of the division's finances.

02:54 PM

Government borrowing costs fall amid stock selloff

The Government has seen its borrowing costs decline rapidly amid the stock market turmoil.

Investors are racing to safe-haven assets following the concerns about banking stocks caused by Silicon Valley Bank's troubles.

The 10-year yield has fallen 20 basis points to 3.59pc, while the peak estimate for interest rises by the Bank of England have fallen below 4.75pc for the first time in a week.

Traders have revised their bets on interest rates after data in the US showed wage growth slowed more than forecast.

That eases pressure on the US Federal Reserve to raise interest rates. Fed swaps are now pricing in a 25 basis point cut in US interest rates by the end of the year.

02:35 PM

Wall Street falls at the opening bell

Wall Street slumped despite positive data on wage growth in the US economy amid market rout triggered by Silicon Valley Bank.

The Dow Jones Industrial Average fell 0.2pc after the opening bell to 32,174.64.

The broad-based S&P 500 dropped 0.3pc to 3,906.50 while the tech-heavy Nasdaq Composite was down 0.5pc to 11,282.77.

02:28 PM

Silicon Valley Bank halts trading as clients advised to withdraw funds

Silicon Valley Bank suspended its shares as it appeared to teeter on the brink of ruin.

Venture capitalists, including Peter Thiel's Founders Fund, have urged businesses in their portfolio to withdraw their funds from the bank.

Meanwhile, analysts cut their ratings on the stock, with Raymond James downgrading the bank to market perform and Truist Securities lowering it to hold, citing concerns over clients pulling funds and the pressure from higher interest rates.

02:01 PM

UK markets claw back losses after US jobs figures

The FTSE 100 and FTSE 250 ticked up slightly after the US jobs data showed slowing wage growth in the world's largest economy - although they are both still heavily down on the day.

The blue-chip index is now down 1.5pc on the day while the midcap market has pared its losses to 1.6pc.

It seems that markets are not sure how to digest the seemingly conflicting numbers coming from the US.

Paul Ashworth, chief North America economist at Capital Economics, said:

01:55 PM

Biggest two-day drop for two-year US bonds since 2008

The US two-year yield has fallen from more than 5pc to 4.7pc in two days, its biggest two day drop since 2008.

Frances Donald, global chief economist for Manulife Investment Management, said:

01:49 PM

Wall Street expected to open higher as wage growth slows

Wall Street turned positive in pre-market trading as monthly wage growth slowed, easing fears of an aggressive rate rise by the Federal Reserve at its next meeting.

Futures on the Dow Jones Industrial Average were up 0.1pc while the tech-heavy Nasdaq 100 was up 0.5pc.

Although wage inflation showed signs of cooling, the US economy added jobs more jobs than expected in February, potentially giving US Federal Reserve policymakers a headache on the future path of interest rates.

Nonfarm payrolls increased by 311,000 jobs last month, the Labor Department's closely watched employment report showed.

Data for January was revised lower to show 504,000 jobs added instead of the previously reported 517,000.

The larger-than-expected increase in payrolls suggested that January's surge in hiring was not a fluke.

However, average hourly earnings rose 0.2pc last month after gaining 0.3pc in January.

That raised the year-on-year increase in wages to 4.6pc from 4.4pc in January, in part as last year's low readings dropped out of the calculation.

01:41 PM

Two-year Treasury yields slump after mixed jobs data

The US jobs figures showed wage growth decreased in February in what is a really mixed bag of data.

US two-year Treasury yields have slumped 18 basis, having been down seven before the report from the Bureau of Labour Statistics.

The unemployment rate was up slightly to 3.6pc but monthly wages rose less than expected at 0.2pc.

01:33 PM

New jobs surge in US

The number of new jobs created in the US has massively overshot expectations, piling more pressure onto the US Federal Reserve to raise interest rates.

Non-farm payrolls increased to 311,000, up from estimates of 225,000.

01:13 PM

Bitcoin falls most since FTX collapse

Bitcoin is on target for its worst week since the collapse of Sam Bankman-Fried's crypto empire in November as investors seek safer assets amid the banking stocks selloff that has hammered markets.

The cryptocurrency has fallen as much as 3.2pc today, breaking below the $20,000 (£16,680) mark for the first time since January.

It tumbled more than 8pc on Thursday, with smaller coins like Ether, Solana and Cardano also adding to losses.

Bitcoin has lost about 13pc so far this week, which is the most since its 23pc weekly tumble following the collapse of trading platform FTX.

12:59 PM

Wandisco hires forensic accountants to investigate potential fraud

Under-fire tech company Wandisco has hired forensic accounts to investigate a suspected $15m (£12.6m) fraud at its business.

Senior technology reporter Gareth Corfield has the details:

Read how the investigation will unfold.

12:45 PM

Wall Street on target to open lower

US markets are on track to continue their falls after the opening bell - unless there is a big surprise from a key jobs report.

Wall Street's main indexes recorded steep losses in the previous session after start-ups-focused lender SVB Financial Group revealed it had realised losses of $1.8bn on bonds as a result of last year's interest rate rises.

It sparked fears of stress in the banking sector, which holds large amounts of US Treasuries, wiping out more than $80bn in value from bank shares.

All three major US indexes are headed towards weekly losses after hawkish messages from Federal Reserve Chairman Jerome Powell stoked fears that the central bank would shift back to a large rate rise at its March meeting.

All eyes are now on the non-farm payrolls data due at 1.30pm, which is expected to show slower US job growth last month, with the unemployment rate staying at a more than five-decade low.

In pre-market trading, the Dow Jones Industrial Average was down 0.2pc, the S&P 500 was off by 0.1pc, and Nasdaq 100 futures were up 0.1pc.

12:34 PM

Elon Musk plans to build utopian community in Texas

Elon Musk is planning to build his own town on thousands of acres of farmland in Texas to create a utopian community where his employees can live and work .

James Warrington and Gareth Corfield have the latest:

Read how it comes as the billionaire seeks greater control over his businesses' operations.

12:03 PM

Bank run wipes £30bn off FTSE 100

More than £30bn has been wiped off the value of the FTSE 100 so far today amid a rout in banking stocks.

The blue chip index has recovered slightly but is still down 1.6pc as investors sell off shares.

HSBC is down 4.8pc, dragging the index down 23 points, while Barclays has dropped 3.3pc, Lloyds has lost 3pc and Natwest is down 2.9pc.

Asset managers have also been hit hard, with Hargreaves Lansdown slumping 4.8pc, L&G losing 4.2pc and Standard Chartered tumbling 3.6pc.

It comes amid concerns about the eroding value of bonds as central banks raise interest rates, lowering their value over time.

The global rout in bank stocks was prompted by Silicon Valley Bank, a major banking partner for the US tech sector, being forced to raise fresh capital after losing $1.8bn selling a package of bonds to meet depositor demands for cash.

11:33 AM

Food shortages hit a quarter of adults, ONS finds

The UK economy may be growing but food shortages remain a problem for the grocery sector - and families.

More than a quarter of adults experienced shortages of essential food items over the past two weeks, according to new data from the Office for National Statistics.

More than a third of adults (35pc) said they could not find a replacement if an item was not available over the same period.

That is an increase from 25pc who said the same thing over the previous fortnight.

Supermarkets including Tesco, Asda, Aldi, Morrisons and Lidl enforced rationing on fruit and vegetables like cucumbers, tomatoes and peppers amid a shortage they have blamed on poor harvests in Spain and north Africa.

11:18 AM

Goldman Sachs no longer predicts UK recession

Goldman Sachs has joined JP Morgan in predicting that the UK will avoid a technical recession at the start of this year - defined as two straight quarters of economic decline.

Economists at the bank said survey data for February pointed to continued momentum in the economy, leading them to revise up its previous prediction of a 0.4pc fall in economic output to stagnation instead.

"Folding in today's stronger than expected data, as well as the recent improvement in the February PMI and our [own economic indicators], we revise up our Q1 tracking estimate meaningfully to zero, and no longer look for a technical recession in the UK," they said.

11:03 AM

Oil on track for weekly loss

Oil is headed for the biggest weekly loss since early February as the prospect of further and potentially faster interest-rate hikes from the Federal Reserve weighed on the outlook for energy demand.

Brent crude, the international benchmark, has dropped 5.8pc since Monday and is down 0.3pc today toward $81.

West Texas Intermediate futures traded near $75 a barrel, falling for a fourth session and down almost 6pc this week.

It may worsen if non-farm payroll data in the US out later increases pressure on the US Federal Reserve to increase interest rates, making commodities like oil more expensive.

Jens Pedersen, a senior analyst at Danske Bank, said:

10:34 AM

Serious Fraud Office knew 'fundamental errors existed' in G4S case, says lawyer

Charges have been dropped against three former executives of G4S's electronic tagging arm who were accused of defrauding the Ministry of Justice following a 10-year investigation.

Joanna Dimmock, the lawyer for former G4S executive James Jardine, one of the accused, said:

10:25 AM

Vodafone shares rise amid Three merger talks

Shares in Vodafone are among only five in positive territory across the whole FTSE 100 today amid reports it is in the final stages of talks to merge is British operations with Three UK.

The company gained as much as 1pc after Bloomberg reported that details of the deal could come as soon as this month.

Its rival BT has also gained on the UK's blue chip stock index, rising 0.9pc.

The only other risers are National Grid, up 0.9pc, Centrica, up 0.5pc and SSE, up 0.1pc.

10:18 AM

G4S contract fraud case collapses

The Serious Fraud Office has dropped its criminal prosecution of three former executives at security company G4S for allegedly defrauding the Government over an electronic tagging contract.

The three ex-employees of G4S subsidiary G4S Care and Justice Services, which had a contract to electronically monitor criminal defendants and released prisoners, had been charged with seven counts of fraud by false representation between 2009 and 2012.

Former managing director Richard Morris, 47, ex-commercial director Mark Preston, 51, and former finance manager James Jardine, 41, had denied all of the charges.

Their trial was supposed to begin in January, but was adjourned because of disclosure issues. An application by the defendants to halt the prosecution was due to be heard later this month.

However, the Serious Fraud Office's lawyer Crispin Aylett told Judge Jeremy Johnson at London's Old Bailey that the agency had decided that it is "no longer in the public interest to proceed with this case".

10:07 AM

Robert Walters to retire after 38 years leading recruitment firm

Global recruiter Robert Walters has announced the retirement of its founder and namesake, as the company revealed fierce competition in the labour market has helped it achieve its highest ever profit.

Robert Walters will step down as chief executive, having set up the business in 1985 and been at the helm for 38 years.

He will be succeeded by Toby Fowlston as chief executive-designate, who has spent 23 years at the firm.

The announcement coincided with Robert Walters revealing an all-time high pre-tax profit of £55.6m in 2022, 11pc higher than the previous year.

Its revenue hit more than £1bn after jumping by 13pc year-on-year.

Fierce competition for talent and wage inflation helped lift the firm's profit during the first half of the year, as a tight labour market put pressure on employers to raise staff pay.

Wages often jumped by around 20pc or more for people moving jobs as roles were in high demand, particularly for niche skill sets, the firm said.

09:45 AM

Biden's subsidies 'may divert £2bn Drax investment away from UK'

Joe Biden's green subsidies may lure power generator Drax to divert £2bn of investment in carbon capture to the US, civil servants reportedly fear.

A delegation of US senators is scheduled to visit the company's power station in Selby, North Yorkshire, next week, Bloomberg reported.

The March 16 visit, where they will be hown the company’s plans for new bioenergy carbon capture and storage technology, is understood to have sparked concerns at the Department for Business and Trade.

Drax has said it would invest £2bn fitting carbon capture equipment to its UK plant as part of a plan that would ultimately support as many as 10,000 jobs.

The company says the equipment will be able to capture 95pc of the carbon dioxide emitted by its biomass-fired power plant and bury it under the North Sea.

Drax declined to comment.

09:33 AM

BP boss's pay doubles after record profits

BP's boss more than doubled his pay last year as the company posted record profits amid surging oil and gas prices.

Bernard Looney received £10m, slightly exceeding Shell's outgoing chief executive Ben van Beurden, who took home £9.7m.

On top of his salary of £1.4m, Mr Looney received an annual bonus of £2.4m and long-term share award with a value of £6m, which was below the maximum possible amount in both cases.

Paula Rosput Reynolds, chair of BP's remuneration committee, said:

09:19 AM

Market rout continues - and it may get worse

The FTSE 100's slump is continuing to worsen.

The blue chip index has now fallen 1.9pc as UK banks joined the decline in global lenders.

Banks have dropping 4.6pc to an eight-week low, spooked by a brutal rout in US bank SVB Financial following a share sale.

HSBC, Barclays, Lloyds and Natwest Group dropped between 4.3pc and 6pc.

The FTSE 250 has plummeted 2pc to 19,291.24.

The market hammering dampens news that the British economy grew by a better-than-expected 0.3pc in January compared to the previous month.

The day may yet get worse for markets, as across the Atlantic, data on US non-farm payrolls out this afternoon will be watched for more clues on the likely size of interest rate rises by the Federal Reserve this month.

09:13 AM

Rising interest rates behind US banking concerns

Silicon Valley Bank — a small technology-focused lender — said Thursday it suffered significant losses on its portfolio, which included US Treasury bonds and mortgage-backed securities.

That has raised concerns about the wider banking market, as banks tend to hold lots of bonds in their portfolio.

The value of bonds drops when central banks raise interest rates, as rising rates lessen the value of their returns.

The Chairman of the US Federal Reserve said this week that rates may need to move higher to tame inflation.

The Bank of England and European Central Bank have also indicated more interest rate rises may be in the pipeline.

08:42 AM

European bank stocks plunge following US rout

Shares in Germany's biggest banks plunged amid the trouble at a regional US lender SVB Financial Group.

Deutsche Bank shares were down nearly 10pc, while Germany's second-largest lender Commerzbank tumbled by 6.12 percent.

Shares of France's biggest banks have also sunk. Societe Generale shares dropped 5.5pc after the Paris stock exchange opened, while BNP Paribas shed 4.4pc and Credit Agricole tumbled 3.6pc.

08:28 AM

Bank stocks plummet as fears over US lenders spark selloff

Britain's banking stocks are dragging down the markets as fears over the sector in the US spilled over into the UK.

On the FTSE 100, Barclays has shed 6.1pc, Lloyds has plunged 4.7pc and Natwest has dropped 4.5pc after signs of trouble at a regional US lender.

It has sparked wider concerns about the sector.

08:18 AM

Berkeley Homes to be 'cautious' as house sales down a quarter

Housebuilder Berkeley Group has said it is taking a "cautious" approach to releasing new phases of developments to the market amid continued "volatility" in the UK property sector.

The company nevertheless kept its outlook for the financial year unchanged.

It told shareholders that sales since the end of September have been around 25pc lower than the "strong" first five months of the financial year.

The sales drop comes amid a backdrop of higher interest rates affecting mortgages and increased costs for potential property buyers.

In a statement, the firm said: "This is a resilient performance in the context of the market volatility since the end of September and reflects the underlying demand for quality homes in London and the South East."

Berkeley is on track to deliver pre-tax earnings of approximately £600m for the year ending April 30.

08:10 AM

US bank rout seeps into UK markets

The sell-off in London comes after US lenders were sent into a tailspin on Thursday.

SVB Financial Group, which specialises in venture-capital financing, announced a stock offering and offloaded securities to raise much-needed cash amid falling deposits.

The firm's shares collapsed 60pc in New York as it said it lost $1.8bn following the sales.

The news came as crypto banking giant Silvergate said it planned to close as the sector faces more turmoil.

As a result, major US banks suffered hefty losses, with Wall Street titans including JP Morgan, Bank of America, Wells Fargo and Citigroup all deep in the red.

08:05 AM

Markets plunge at the open

The growth in the economy could not stop a big selloff on the markets to start the day.

The FTSE 100 slumped following a rout on Wall Street with banks taking a hefty hit after signs of trouble at a regional US lender sparked concerns about the wider sector.

The blue-chip index plunged 1.5pc as markets opened to 7,760.95 while the domestically-focused FTSE 250 dropped by 1.6pc to 19,366.21.

07:58 AM

Broader picture on economy 'more ambiguous,' warns NIESR

Paula Bejarano Carbo, associate economist at the National Institute of Economic and Social Research (NIESR), said:

07:51 AM

Return to schools and end of postal strikes help boost economy

The services sector was the main driver for the return to growth in January, rising by 0.5pc.

The largest driver of the growth in services was education, which grew by 2.5pc following a fall of 2.6pc in December.

School attendance levels returned to normal levels following a significant drop the previous month.

Transport and storage services grew by 1.6pc, with the main contributor to this coming from a 6.4pc increase in postal and courier activities.

This growth comes after a fall of 10.5pc in December amid postal strikes.

The only negative contributor in services was real estate activities, which fell by 0.1pc.

Within this subsector, real estate activities on a fee or contract basis fell by 2.3pc.

07:44 AM

Pound rises after data shows economy grew

Sterling has moved higher as data from the Office for National Statistics showed the economy grew by 0.3pc in January.

The pound has gained 0.2pc against the dollar to be worth more than $1.19.

It remains flat against the euro, which is worth nearly 89p.

07:41 AM

Growing economy 'increases fears rates will be higher for longer'

Neil Birrell, chief investment officer at asset management business Premier Miton Investors, said:

07:38 AM

Russian war in Ukraine having 'dragging effect' on economy, says Cleverly

Foreign Secretary James Cleverly has said ministers would like to see "greater" economic growth than the 0.3% recorded in January.

He told Times Radio:

07:37 AM

Economy in 'managed decline,' says Reeves

Shadow chancellor Rachel Reeves said:

Today's results show our economy is still inching along this Tory path of managed decline.

People will be asking themselves whether they feel better off under the Tories, and the answer will be no.

But this is not a new trend. 13 years of Tory failure and wasted opportunities have left growth on the floor and our economy weakened.

07:34 AM

Growth boosts hopes UK will avoid recession

Jonathan Moyes, head of investment research at Wealth Club said:

07:28 AM

Economy's growth 'no surprise,' says Panmure Gordon

Arts, entertainment and recreation grew by 3.4pc in January, largely driven by the return of Premier League football after the World Cup.

Sports, amusements and recreation activities grew by 8.9pc, after the end of temporary shocks caused by the tournament in Qatar and strikes, according to Panmure Gordon's chief UK economist Samuel Tombs.

07:21 AM

Public finances better than expected before Budget, says Lloyds

Jeavon Lolay, head of economics and market insight at Lloyds Banking Group said:

07:19 AM

Return to classroom drives growth, says ONS

ONS director of economic statistics Darren Morgan said:

07:08 AM

Hunt: 'UK economy more resilient than expected'

Chancellor Jeremy Hunt said:

07:07 AM

UK economy grew at start of the year

The UK's economy returned to growth in January, easing fears of an impending recession ahead of Chancellor Jeremy Hunt's spring Budget, official figures have shown.

Gross domestic product (GDP) rose by 0.3pc in January, according to the Office for National Statistics.

The services sector also grew by 0.5pc in January after falling by 0.8pc in December.

Chancellor Jeremy Hunt said: "In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go.

"Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy - so we can improve living standards for everyone."

The UK economy narrowly avoided recession at the end of 2022 even though the economy shrank by 0.5pc in December.

The economy flatlined in the final three months of last year, following a drop of 0.3pc between July and September, according to the Office for National Statistics (ONS).

Although the economy grew slightly to begin the year, looking at the broader picture, GDP was flat in the three months to January.

Services expanded but manufacturing and construction were a drag on growth:

07:01 AM

Good morning

The year got off to a positive start as the economy grew by 0.3pc in January, according to the Office for National Statistics..

The expansion in gross domestic product (GDP) comes after Britain narrowly avoided a recession at the end of last year.

5 things to start your day

1) Hunt forecast to have £166bn of headroom for Budget tax cuts | Chancellor comes under renewed pressure to pivot on corporation tax rise

2) I struggle to find men to work for me, says John Lewis chief | Dame Sharon White says she has been criticised for trying to 'rebalance' the 'strong male culture' at the retailer

3) Brexit freedoms make UK a magnet for highly-skilled migrants, says OECD | Abolishing red tape after leaving the EU is helping Britain lure more global talent

4) Credit Suisse shares hit record low after accounts questioned by US regulator | Struggling Swiss bank delays annual report after conversation with Securities and Exchange Commission

5) Inside Joe Biden’s plan for a tax raid on billionaires | The US President wants higher taxes – but he faces a battle to get them past Republicans

What happened overnight

Falling bank stocks caused Asian markets to drop after a surprise capital raising at a Silicon Valley start-up lender unleashed fears of broader banking-system stress.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7pc to a two-month low, with banks and Hong Kong tech stocks leading losses. Australia's benchmark index S&P/ASX200 lost 2.3pc.

Japan's shares ended lower, snapping a five-day winning streak, after the Bank of Japan left its ultra-easy monetary policy unchanged at Governor Haruhiko Kuroda's last meeting.

The benchmark Nikkei 225 index dropped 1.7pc to close at 28,143.97, while the broader Topix index lost 1.9pc to 2,031.58.

The US dollar edged higher and short-end Treasuries extended sharp overnight gains - driving two-year yields down another 12 basis points to 4.7837pc in Tokyo trading.

The sharp moves followed SVB Financial Group, parent of start-up-lender Silicon Valley Bank, noting a higher-than-expected "cash burn" from clients, falling deposits and rising costs of capital. It announced an equity sale hours after crypto-focused lender Silvergate said it was closing down.

Early trading gains on Wall Street were sharply reversed by the end of the day. The Dow Jones Industrial Average closed 1.7pc lower to 32,254.86.

The broad-based S&P 500 fell 1.9pc to 3,918.32 while the tech-rich Nasdaq Composite sunk 2.1pc to 11,338.36.