Shares in Asia fell on renewed concerns about the health of the banking sector and ahead of a Federal Reserve decision Wednesday where policymakers are expected to add to their rate-hike cycle.
(Bloomberg) — Shares in Asia fell on renewed concerns about the health of the banking sector and ahead of a Federal Reserve decision Wednesday where policymakers are expected to add to their rate-hike cycle.
Shares slipped in Hong Kong, South Korea and Australia following losses in US equities Tuesday. Markets are shut in Japan and mainland China for holidays, and there’s no trading of cash Treasuries in Asia hours.
US equity futures edged higher in Asia after a selloff in regional lenders sent the S&P 500 down 1.2% in New York. Financial and energy sector were the worst performers. US regional lenders PacWest Bancorp and Western Alliance Bancorp both tumbled 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% slide for the US oil price, the biggest decline since July, in a sign of unease about global growth. The decline stabilized early Wednesday.
The New Zealand dollar gained versus all its Group-of-10 peers after better-than-expected jobs data. Australian and New Zealand’s government bonds rose, following Tuesday’s rally in Treasuries. The US two-year note yield slid 18 basis points to below 4%, and the 10-year yield had dropped 14 basis points to 3.42%.
US economic data pointed to a cooling of 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.”
Following a hike this week, the Fed is then expected to signal a pause is coming in June, according to Tony Sycamore, a market analyst at IG Australia Pty in Sydney. “The Fed is unlikely to open the door to possible rate cuts this year which could have been the catalyst for another leg higher” for US equities, he said.
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:
- US ADP employment, S&P Global US services PMI, US 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 rose 0.1% as of 11:34 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 0.7%
- Hong Kong’s Hang Seng Index fell 1.6%
- Australia’s S&P/ASX 200 Index fell 1.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.1022
- The Japanese yen rose 0.4% to 136.03 per dollar
- The offshore yuan was little changed at 6.9281 per dollar
- The Australian dollar rose 0.1% to $0.6671
Cryptocurrencies
- Bitcoin fell 0.7% to $28,492.6
- Ether fell 0.4% to $1,862.58
Bonds
- Australia’s 10-year yield declined five basis points to 3.39%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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