Experimental feature

Listen to this article

Experimental feature

US bank shares sold-off on Monday and were set for their worst month since the June Brexit vote shook Wall Street as investors grew increasingly anxious that President Donald Trump will not deliver on campaign promises that were seen as bullish for lenders.

The closely-tracked KBW banks index fell 2.1 per cent on Monday, and was down 7.6 per cent for March.

Bank shares have been among the best performers since Donald Trump shocked politicos in Washington by beating Hillary Clinton in the presidential election. But the excitement has waned substantially after the billionaire businessman has thus far failed to successfully apply his deal-making prowess to Congress.

In a substantial blow to the administration, Mr Trump and GOP leadership failed to overcome fractures in the Republican party over plans to repeal Obamacare. That has led to growing worry that the administration may struggle to push other measures through, including cuts to the corporate tax rate and de-regulation of banks.

In turn, that has lessened expectations for a significant pick-up in inflation, and caused the yield curve to begin to flatten. The difference in two and 10-year Treasury yields clocked in on Monday at 1.12 percentage points, from a post-election high of 1.36pp marked on December 22.

Lenders are particularly sensitive to the shape of the yield curve since they borrow on the short-term market and lend over longer periods.

The KBW banks index is still up by 18.4 per cent since the election, but that represents a sharp pull-back from the 32.2 per cent rise as of March 1.

Get alerts on Equities when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article