Asian stocks were in retreat on Friday, forced back by an onslaught of poor data out of China, an overnight slump on Wall Street sparked by banking sector worries and the continuing gloomy global picture.
Japan’s Nikkei share average dropped more than 1% after a five-day winning streak, as financial and tech stocks tumbled, taking their cues from that overnight New York slide.
Automakers also slid as the yen rebounded further from a multi-month low, cutting the value of overseas sales.
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Investors were largely unconcerned about a Bank of Japan policy decision later in the day, with no changes expected from Governor Haruhiko Kuroda’s last meeting before retirement.
However, a crucial US jobs report is also due on Friday, which could shape the scale of a Federal Reserve rate increase this month.
The Nikkei share average dropped 1.67%, or 479.18 points, to close at 28,143.97, after touching a more than six-month high of 28,734.79 on Thursday. The broader Topix was down 1.91%, or 39.51 points, to 2,031.58.
China and Hong Kong stocks fell as well, led by automobile stocks and internet stocks in Hong Kong, as investors’ concern about China’s recovery resurfaced after weaker-than-expected data this week dampened risk-on appetite.
“This week’s economic indicators, for example, the worse-than-expected 10.2% drop in January and February import data, has revived investors’ concerns about the pace of economic recovery in China and weighed on sentiments in Hong Kong,” said Linus Yip, chief strategist at First Shanghai Securities.
And on Thursday, China reported its consumer price index (CPI) for February was 1.0% higher than a year earlier, rising at the slowest pace since February 2022 and indicating cautious consumption sentiment.
Investors also worried that the US non-farm payrolls report due on Friday could spur more aggressive interest rate hikes from the Federal Reserve.
China’s blue-chip CSI300 Index dropped 1.31%, while the Shanghai Composite Index lost 1.40%, or 46.02 points, to end at 3,230.08.
The Hang Seng Index slipped 3.04%, or 605.82 points, to 19,319.92, while the Shenzhen Composite Index on China’s second exchange retreated 1.24%, or 26.16 points, to 2,087.17.
Elsewhere across the region, Sydney, Seoul, Taipei and Manila were off more than 1%. Singapore, Jakarta and Wellington were also sharply lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.3% to a two-month low.
Globally, bonds rallied and expectations for US interest rate rises were reduced after a surprise capital raising at a Silicon Valley startup lender unleashed fears of broader banking-system stress.
The US dollar rose and short-end Treasuries extended sharp overnight gains, driving two-year yields down another nine basis points to 4.8068%.
Fed funds futures also rallied strongly, pulling the market-implied peak in US rates from above 5.6% to just below 5.5%, and pricing about a 50% chance of a 50 basis point Fed hike this month, down from more than 70% a day earlier.
The moves followed SVB Financial Group, parent of startup-lender Silicon Valley Bank, noting higher-than-expected “cash burn” from clients, falling deposits and rising costs of capital. It announced an equity sale hours after crypto-focused lender Silvergate said it was closing down.
SVB stock was still sliding after the bell and has lost about 70% of its value in 24 hours. Titans’ shares were dragged down with it, with JP Morgan Chase & Co losing 5.4%, Citigroup down 4.1% and big lenders in Asia and Australia on the slide, albeit to a lesser extent, on Friday morning.
“I think there’s speculation that there are wider problems within the US banking system, or there’s that potential, and that’s caused a re-think of Fed policy,” said ING economist Rob Carnell in Singapore.
“The thinking is that if what the Fed’s doing is causing this distress, then perhaps they won’t be doing that much more,” he said.
Bitcoin was nursing losses just above the psychological $20,000 level as the fallout from the demise of Silvergate weighs on the broader mood in digital assets.
Brent crude futures were pinned at $81.55 a barrel and gold at $1,831 an ounce.
Tokyo – Nikkei 225 < DOWN 1.67% at 28,143.97 (close)
Hong Kong – Hang Seng Index < DOWN 3.04% at 19,319.92 (close)
Shanghai – Composite < DOWN 1.40% at 3,230.08 (close)
London – FTSE 100 < DOWN 1.82% at 7,736.28 (0925 GMT)
New York – Dow < DOWN 1.66% at 32,254.86 (Thursday close)
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