UK stocks slide as banks sink

London’s blue-chip FTSE 100 index fell on Friday as UK lenders dropped 4.6% in a global banking sector selloff, while uncertainty around central banks’ moves added to the nerves ahead of U.S. payrolls data.

UK banks dropped to an eight-week low, spooked by a brutal rout in U.S. bank SVB Financial following a share sale.

HSBC, Barclays, Lloyds and Natwest Group dropped between 3.1% and 5.2% on fears of broader banking system stress.

“Developments at SVB Financial have raised questions on the subject of unrealised losses on bond portfolios and what it means for bank capitalisation levels,” said Chris Turner, global head of markets and regional head of research for UK and CEE.

The FTSE 100 slipped 1.9% to a five week low, while the more domestically focused mid-cap index gave up 2.1% to hit a two-month low.

Data that showed the British economic output rose by a better-than-expected 0.3% month-on-month in January bolstered bets that the Bank of England will raise interest rates again this month.

Across the Atlantic, U.S. non-farm payrolls data, due at 1330 GMT, is expected to show a rise of 205,000 and any surprise to the upside is seen strengthening bets for continued aggressive interest rate hikes.

The FTSE 100 is set to the end the week down about 2.8% in what could be its worst week since September, as worries around hawkish central banks sapped risk appetite.

Next week, investors will be watching for UK Chancellor Jeremy Hunt’s spring budget.

“We see a lower likelihood of major tax or spending measures next week. More significant fiscal pledges are likely to be reserved for the next Autumn Statement or the Conservatives’ next election manifesto,” said economists at Goldman Sachs.

“We expect around 16 billion pounds of additional spending in our baseline.”