Asian shares dropped Friday following a sharp decline on Wall Street amid concern that pockets of trouble in the US banking sector could portend broader dangers.
(Bloomberg) — Asian shares dropped Friday following a sharp decline on Wall Street amid concern that pockets of trouble in the US banking sector could portend broader dangers.
Treasuries extended their rally. The yen weakened while Japan’s 10-year government bond yield dropped comfortably below the top of the central bank’s allowable trading band after monetary policy was kept unchanged.
An Asian equity gauge slid more than 1.5% and headed for the lowest close since early January. Finance stocks were among the heaviest decliners after banks came under fire in the US with the collapse of Silvergate Capital Corp. and troubles at Silicon Valley-based lender SVB Financial Group.
Asian shares related to cryptocurrencies slumped and MSCI China Index also fell, erasing all of its gains for this year.
Read more: Read more: Wall Street’s Favorite Trade Is Hammered in Bank Stock Meltdown
The Bank of Japan maintained its policy balance rate at -0.1% and kept its 10-year yield target at about 0% at Governor Haruhiko Kuroda’s last meeting, as was expected by most economists. That’s removed one wildcard for traders Friday but doesn’t change the long-term challenge the BOJ faces with bond-market dysfunction and upward pressure on interest rates.
“We expect continued policy normalization and it is likely to come under the new Governor Ueda. The exact timing of the policy change will be difficult to predict and could be as early as the second quarter,” said Jennifer Kwan, senior investment specialist for global fixed income, currency and commodities at JPMorgan Asset Management. “We are staying underweight in Japanese bonds, in view of the potential higher yields in JGBs later this year.”
Treasury yields extended their declines after the rout in stocks spurred demand for haven assets. Yield on the two-year continued its slide to more than 10 basis points at one point on Friday. Australian and New Zealand government bonds rallied as well.
US stocks had gained early in the session Thursday after data showed weekly jobless claims had risen to 211,000 during the week ending March 4, ahead of expectations for 195,000 and marking the first time claims surpassed 200,000 since early January.
The numbers set the stage for Friday’s monthly jobs report, with even just slightly stronger-than-forecast figures expected to cement bets for a bigger hike at the March 21-22 Fed meeting. Economists project a 225,000 increase in February payrolls, about half January’s blockbuster pace, but a figure in that range would confirm the US economy continues to add jobs at a strong rate.
A softer-than expected number could soften wagers on a half-point move in March, and tilt expectations back to a quarter-point hike.
However, the Fed will have to position to “potentially raise by a half a percentage point very quickly” if the payrolls data come in hotter than expected, said Danielle DiMartino Booth, chief executive officer and chief strategist at Quill Intelligence, on Bloomberg Television.
Cryptocurrencies dropped after pulling up slightly early on Friday. Bitcoin on Thursday fell 8.1%, the most since November, amid Silvergate’s meltdown.
In commodities, oil headed for the biggest weekly loss since early February as the prospects of higher interest rates weighed on energy demand outlook.
Key events this week:
- US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.5% as of 12:28 p.m. Tokyo time. The S&P 500 fell 1.8%
- Nasdaq 100 futures fell 0.4%. The Nasdaq 100 fell 1.8%
- Japan’s Topix index fell 1.3%
- Hong Kong’s Hang Seng Index fell 2.2%
- China’s Shanghai Composite Index fell 1.2%
- Australia’s S&P/ASX 200 Index fell 2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0594
- The Japanese yen rose 0.1% to 135.96 per dollar
- The offshore yuan was little changed at 6.9751 per dollar
- The Australian dollar was little changed at $0.6585
Cryptocurrencies
- Bitcoin fell 0.9% to $20,043.5
- Ether fell 0.4% to $1,426.55
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.87%
- Japan’s 10-year yield fell 5.5 basis points 0.445%
- Australia’s 10-year yield declined eight basis points to 3.63%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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