SINGAPORE, March 10 (Reuters) – Falling bank stocks sent Asian markets tumbling on Friday as bonds rose and expectations for US interest rate hikes were lowered after a surprise capital raise at a Silicon Valley startup lender raised fears of a broader unleashed stress in the banking system.
The yen weakened and Japanese government bond yields plummeted after the Bank of Japan opted to leave stimulus unchanged at Governor Haruhiko Kuroda’s latest meeting, as expected.
The benchmark 10-year JGB yield, which captures the BOJ within 50 basis points on either side of zero, retreated sharply from that ceiling, eventually holding at 0.445%. The yen last fell about 0.4% to 136.615 per dollar after a choppy fall of as much as 0.6%.
Japan’s Nikkei (.N225) fell to around 1% from a loss of 1.23% prior to the central bank’s decision.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1.8% to a two-month low, with banks and technology stocks from Hong Kong the biggest losses.
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S&P 500 futures fell 0.57% after the cash index (.SPX) fell 1.8% and fell below its 200-day moving average.
The US dollar edged up slightly and short-end Treasuries posted sharp overnight gains, sending two-year yields down another 12 basis points to 4.7837% in Tokyo trading.
Fed fund futures also rallied, pushing the market-implied spike in US interest rates from above 5.6% to just below 5.5%, and a roughly 50% chance of a rate hike from the Fed. Fed was priced in by 50 basis points this month, down more than 70% a year. day earlier.
The sharp moves followed SVB Financial Group (SIVB.O), the parent company of startup lender Silicon Valley Bank, noting higher-than-expected customer cash burn, declining deposits and rising cost of capital. It announced a share sale hours after crypto-focused lender Silvergate (SI.N) said it would close.
SVB shares are still sliding after the bubble, having lost about 70% of their value in 24 hours. Shares of major banks were dragged along, with JP Morgan Chase & Co (JPM.N) losing 5.4%, Citigroup (CN) losing 4.1% and major lenders in Asia and Australia slipping – albeit to a lesser extent. Friday morning.
“I think there is speculation that there are broader problems within the US banking system, or potential, and that has led to a rethinking of Fed policy,” said ING economist Rob Carnell in Singapore.
“The thinking is that if what the Fed is doing is causing this turmoil, maybe they won’t do much more,” he said.
“But it’s a big move based on what appears to be rather woolly speculation… which just shows how jittery the markets are right now, and this has spread to all other markets.”
Surprisingly high US jobless claims provided a weak start to broader US employment data later on Friday, putting some pressure on the dollar’s recent gains.
The numbers loom as a crucial barometer of the health of the US labor market and the direction of interest rates after Fed Chairman Jerome Powell warned rates could rise further and faster if data shows it is necessary to get a grip on inflation.
Bitcoin posted losses just above the $20,000 psychological level as the fallout from Silvergate’s demise weighs on the broader mood in digital assets.
Brent crude oil futures fell to $81.19 a barrel, while gold was stuck at $1,830 an ounce.
Edited by Simon Cameron-Moore and Kim Coghill
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