Shares in Asia fell after Wall Street dropped on renewed concern about the banking sector before a Federal Reserve decision Wednesday where policymakers are expected to raise interest rates.
(Bloomberg) — Shares in Asia fell after Wall Street dropped on renewed concern about the banking sector before a Federal Reserve decision Wednesday where policymakers are expected to raise interest rates.
Shares declined in South Korea and Australia at the open, while markets in Japan and mainland China are closed for holidays. There’s no trading of cash Treasuries in Asia hours due to the holiday in Japan.
US equity futures steadied in the early Asian trade after the S&P 500 slipped 1.2% Tuesday with the financial sector the worst performer after energy. US regional lenders PacWest Bancorp and Western Alliance Bancorp both slid at least 15%, just a day after JPMorgan Chase & Co.’s acquisition of First Republic Bank seemed to bolster confidence in the sector.
The decline in energy stocks followed a 5.3% drop for the US oil price, the biggest decline since July, in a sign of unease about global growth. The decline stabilized early Wednesday.
The Bloomberg dollar index was little changed. Australian government bonds rose and New Zealand’s debt edged higher, following a rally in Treasuries Tuesday. The US two-year note yield had slid 18 basis points to below 4%, and the 10-year yield dropped 14 basis points to 3.42%.
US economic data showed a cooling in the labor market, with the number of job openings in March dropping to the lowest level in two years. The decline in available positions comes before the Fed’s rate decision where it is forecast to raise borrowing costs 25 basis points. Market pricing indicates the increase will mark the peak of the tightening cycle before weaker growth prompts the central bank to cut rates later in the year.
‘Tightening Bias’
“Should the Fed offer any sort of tightening bias in its outlook – and overlook the financial stability risk – then the skew is very much in favor of a hawkish reaction,” Chris Weston, head of research at Pepperstone Group Ltd in Melbourne, wrote in a note. “We initially see US bond yields and the US dollar higher, with gold sellers in the mix.”
The lack of clarity regarding the US debt ceiling issue also added to the uncertain mood. Between now and June 1 — the date by which the Treasury Department could run out of sufficient cash — President Joe Biden and members of the House and Senate are scheduled to be in town at the same time for the sum total of one week to find a solution.
Advanced Micro Devices Inc., Ford Motor Co., and Starbucks Corp. all fell in after-hours trading after the companies reported earnings. AMD shares dropped 3.7% after it announced a lackluster sales forecast. Starbucks slipped 5.6% in late trading after it reaffirmed its guidance for the full fiscal year, a cautious move that appeared to disappoint Wall Street.
In commodities, oil steadied in Asia after tumbling more than 5% on Tuesday and gold was little changed.
Key events this week:
- ADP employment, S&P global US services PMI, ISM services, Wednesday
- Fed Chair Jerome Powell holds news conference following rate decision, Wednesday
- US initial jobless claims, trade balance, Thursday
- European Central Bank rate decision, followed by ECB President Christine Lagarde’s news conference, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:10 a.m. Tokyo time. The S&P 500 fell 1.2%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.9%
- South Korea’s Kospi index fell 0.5%
- Australia’s S&P/ASX 200 Index fell 1%
- Hong Kong’s Hang Seng futures fell 1.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1008
- The Japanese yen was little changed at 136.52 per dollar
- The offshore yuan was little changed at 6.9335 per dollar
- The Australian dollar was little changed at $0.6662
Cryptocurrencies
- Bitcoin was little changed at $28,671.41
- Ether was little changed at $1,868.95
Bonds
- Australia’s 10-year yield declined eight basis points to 3.37%
Commodities
- West Texas Intermediate crude fell 0.1% to $71.57 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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