Banks Battered by Recession Worries

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US bank stocks tumbled in yesterday’s trading to worrying lows, as fears of a recession set in and investors took a risk-off approach.

Concerns over the health of global bank stocks have been building over worries that their exposure to energy leaves them vulnerable, and concern over the global economy as a whole, as the World Bank and global credit rating agencies cut growth forecasts and anticipate a worldwide slowdown.

The S&P500 index, already one of the worst performing markets in the US, fell by a further 2.6% yesterday, putting it dangerously close to bear market territory. Stocks in several major banks including Morgan Stanley (NYSE: MS), Citi (NYSE: C) and JP Morgan (NYSE: JPM) all slid further, with some sliding more than 5% for the day, as investors bailed out over rate hike worries and the above mentioned financial concerns.

As concern deepens over the state of emerging markets, the increase and prolonged energy price slump, and the health of the global economy as a whole, banks are likely to face increased pressure and investors are likely to continue to looks to others sectors for places to park their cash.

Can banks withstand the pressure? Or are we headed into another recession which will put yet more pressure on already stressed banks?

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