Asian shares slump, gold hits new peak as banking worries weigh
Asian shares slipped, Treasuries extended their gains and gold hit a new high on Friday as signs of credit stress at regional U.S. banks spooked investors and kept markets waiting for more Federal Reserve policy easing.
European shares looked set for sharp falls at the open, with EURO STOXX 50 futures down 1% and FTSE futures 1.1% lower. Both S&P 500 futures and Nasdaq futures lost 0.6% ahead of more earnings from US regional banks later in the day.
Overnight, Zions slumped 13% after disclosing it would take a $50 million loss in the third quarter on two loans from its California division. Western Alliance shares plunged 11% after filing a lawsuit alleging fraud by Cantor Group V, LLC.
“While the two lenders’ recent troubles appear to be well under control, when there is smoke there is often fire, and the resolution of the crisis in 2023 has been the trigger for another banking turmoil,” said Tony Sycamore, an analyst at IG, referring to a series of bank failures that year that prompted the Fed to take extraordinary steps to stabilize the financial system.
The developments hit US banking stocks and weighed on the US dollar to the benefit of the yen and Swiss franc.
Safe-haven Treasuries rallied further, with the two-year Treasury yield (US2YT=RR) falling 3 basis points on Friday to a new three-year low of 3.3890% as investors priced in at least two quarter-point interest rate cuts from the Federal Reserve this year.
The move to safety saw gold hit a record $4,378.69 an ounce. Gold bullion is expected to see a weekly rise of 8.5%, the biggest since September 2008 when the collapse of Lehman Brothers triggered the global financial crisis.
Silver also hit a new peak.
Sentiment in equities also took a hit due to escalating trade tensions between China and the United States. China on Thursday accused the US of stoking panic over rare earth controls, and rejected White House calls to lift the curbs.
The MSCI index covering Asia Pacific shares outside Japan (.MIAPJ0000PUS) fell 1%, taking the week into negative territory. Japan’s Nikkei lost 1.5% as its banking index plunged.
Taiwan stock TWSE:TAIEX fell 1.1% even after chipmaker TSMC posted a record quarterly profit and issued a favorable forecast for spending on artificial intelligence.
Chinese blue chips fell 1.5% and Hong Kong’s Hang Seng fell 1.8%.
Credit concerns and interest rate cut speculation weakened the US dollar, which slipped 0.2% on Friday to 98.10 against its peers. The currency is on track for a weekly decline of 0.8%.
The yen and Swiss franc strengthened the most, rising 0.9% and 1.2% for the week.
Bank of Japan Governor Kazuo Ueda said the central bank would pay close attention to various data in deciding whether to raise interest rates this month or not.
Oil prices extended their losses, having dropped 1% overnight as US President Donald Trump said he and Russian President Vladimir Putin agreed to meet soon in Hungary to discuss ending the war in Ukraine.
US crude fell 0.4% to $57.25 a barrel, while Brent also fell 0.3% to $60.87.
Source: Reuters
