Asian shares tracked Wall Street lower, bonds extended gains and gold hit a fresh record on Friday, with signs of credit stress at US regional banks putting investors on edge.
Overnight, Zions sank 13 per cent after disclosing it would take a $US50 million ($A77 million) loss in the third quarter on two loans from its California division. Western Alliance’s stock slumped 11 per cent after it initiated a lawsuit alleging fraud by Cantor Group V, LLC.
“While the recent issues of the two lenders seems well contained, where there is smoke there is often fire and the remedy of the 2023 crisis has created a tinderbox for another banking flare-up,” said Tony Sycamore, analyst at IG.
The two developments pummelled US banking stocks and weighed on the US dollar to the benefit of the yen and the Swiss franc. Two-year Treasury yields hit a fresh three-year trough of 3.4040 per cent on Friday as investors priced in at least two more quarter-point rate cuts from the Federal Reserve this year.
The flight to safety saw gold hit a record of $US4,378 ($A6,735) per ounce, although it ran into some profit-taking and was last flat. Even so, the bullion is set for a weekly gain of 7.6 per cent, its biggest since early 2020. Silver also hit a new peak.
Both S&P 500 futures and Nasdaq futures lost 0.3 per cent ahead of more earnings from US regional banks later in the day. European stock futures fell 0.7 per cent, while FTSE futures dropped 0.9 per cent.
Sentiment in equities has also taken a hit due to rising trade tensions between China and the United States. China on Thursday accused the US of stoking panic over its rare earth controls, rejecting a White House call to roll back the curbs.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.9 per cent, taking the week to negative territory. Japan’s Nikkei lost 1.0 per cent as its banking index tumbled.
Taiwan’s shares fell 0.9 per cent even after chipmaker TSMC posted a record quarterly profit and issued a rosy forecast for spending on artificial intelligence.
Both Chinese blue chips and Hong Kong’s Hang Seng tumbled 1.4 per cent.
The credit worries and rate cut bets undermined the US dollar, which was on track for a weekly loss of 0.6 per cent against its major peers to 98.24, the lowest in ten days.
The yen and the Swiss franc gained most, up 0.7 per cent and 0.9 per cent for the week.
Bank of Japan Governor Kazuo Ueda said that the central bank would scrutinise various data in deciding whether or not to raise interest rates this month.
Liberal Democratic Party (LDP) leader Sanae Takaichi is still wooing allies to help clinch a prime ministerial vote expected next week.
Treasuries are set for a third straight week of gains. Two-year Treasury yields slipped two basis points on Friday to 3.4040 per cent, a fresh three-year low, and were headed for a third straight week of declines.
Ten-year Treasury yields also eased two bps to 3.959 per cent and were down 10 bps for the week.
Oil prices extended losses, after falling 1.0 per cent overnight as US President Donald Trump said he and Russian President Vladimir Putin agreed to meet in Hungary soon to discuss ending the war in Ukraine.
US crude fell 0.7 per cent to $US57.04 ($A87.75) a barrel, while Brent was also off 0.7 per cent to $US60.63 ($A93.27).
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