Asian stocks suffered on Friday as worries over a global banking crisis resurfaced and tensions between the US and China continued to distract investors.
Those lingering banking stability concerns gripped Wall Street overnight and came just hours after the Biden administration added 14 more Chinese companies to a red flag list for exports, while US lawmakers attacked TikTok for its ties with China, pushing further for a ban on the app nationwide.
Japanese shares traded lower, as a stronger yen raised concerns about impact on exporters’ earnings, while gains in heavyweight technology stocks capped declines.
Data, though, showed Japan’s manufacturing activity contracted for a fifth straight month in March, adding to evidence of sputtering global demand, while core consumer inflation in Japan eased, although price pressures persist.
The Nikkei share average edged down 0.13%, or 34.36 points, to close at 27,385.25, while the broader Topix was down 0.10%, or 2.00 points, to 1,955.32.
Financial sectors were weak, with the banking index slipping 0.74% and insurance index losing 0.87%.
China stocks fell and Hong Kong was mixed, as elevated Sino-US geopolitical tensions dented investor sentiment after US lawmakers on Thursday accused TikTok of serving harmful content as they pushed to ban the app.
The Shanghai Composite Index fell 0.64%, or 21.00 points, to 3,265.65, while the Shenzhen Composite Index on China’s second exchange edged up 0.25%, or 5.33 points, to 2,116.77.
Concerns over a global banking crisis persisted, as Hong Kong’s central bank said on Friday that the city needs to watch carefully for any further “spillover” from US regional banks, although it has very little exposure to the situation in European and US financial institutions.
The Hang Seng Index dropped 0.67%, or 133.96 points, to 19,915.68. Tech stocks rose 1.3%, continuing their momentum from yesterday, while energy and financial shares dropped 1.7% and 1.2%, respectively.
Elsewhere across the region, Sydney, Seoul, Singapore and Wellington were also down.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%, although it was still heading for a solid weekly gain of 2%.
Treasury Yields Unsettled
Treasury Secretary Janet Yellen said on Thursday that she was prepared to take further action to ensure bank deposits are safe, a day after saying that blanket insurance was not on the agenda, prompting a renewed sell-off in banking stocks.
“They’re still struggling with what they will do in terms of uninsured bank deposits… that’s what’s partly given us the rollercoaster ride a little bit in share markets,” said Shane Oliver, chief economist at AMP.
“The bottom line is the Federal Reserve has raised interest rates aggressively, and they will invariably keep going until something breaks. But at the moment, they’re not sure whether something’s broken or not, despite the turmoil in banks.”
Markets, however, have bet on a recession and incoming rate cuts. Every Treasury yield from one month to 30-years was under the overnight cash rate, a phenomenon that has in the past heralded a nearing recession.
Treasury yields were trying to find a floor amid the market volatility. Two-year Treasury yields, which fell a whopping 125 basis points within just two and a half weeks, were steady at 3.7961% on Friday.
Investors are leaning towards a pause from the Fed at the policy meeting in May, after the latest dovish hike on Wednesday.
The Bank of England overnight raised borrowing costs for the 11th time in a row after a nasty inflation surprise, but said the resurgence would probably fade fast, prompting speculation it had ended its run of hikes.
The yen climbed 0.5% to a fresh six-week high at 130.19 per dollar, extending its weekly gain to a solid 1.3%, while the euro recoiled from a seven-week high to $1.083 but was up 1.6% for the week.
The US dollar was headed for a heavy 1.3% weekly loss against its major peers at 102.53, not too far away from a seven-week trough of 101.91.
Tokyo – Nikkei 225 < DOWN 0.13% at 27,385.25 (close)
Hong Kong – Hang Seng Index < DOWN 0.67% at 19,915.68 (close)
Shanghai – Composite < DOWN 0.64% at 3,265.65 (close)
London – FTSE 100 < DOWN 1.52% at 7,385.60 (0936 GMT)
New York – Dow > UP 0.23% at 32,105.25 (Thursday close)
- Reuters with additional editing by Sean O’Meara