Asia down, gold claims record as banking fears weigh
Asian stocks followed Wall Street lower, bonds extended gains and gold hit a new record on Friday on signs that credit stress at U.S. regional banks was unnerving investors.
Zions tumbled 13 percent overnight after announcing it would lose $US50 million ($77 million) in the third quarter due to two loans from its California division. Shares of Western Alliance fell 11 percent after Cantor Group V, LLC filed a lawsuit alleging fraud.
“While the two lenders’ recent troubles appear to be well contained, where there is smoke there is often fire, and the resolution of the 2023 crisis has created a firebox for another banking implosion,” said IG analyst Tony Sycamore.
These two developments shook US banking stocks and put pressure on the US dollar in favor of the yen and Swiss franc. Two-year Treasury yields hit a three-year low of 3.4040 percent on Friday as investors priced that the Fed could cut interest rates by at least two more quarter points this year.
The flight to safety saw gold hit a record US$4,378 ($6,735) per ounce, but took some profits and was last flat. Despite this, the bullion’s weekly gain will be 7.6 percent, its biggest gain since the beginning of 2020. Silver also reached a new peak.
Both S&P 500 and Nasdaq futures lost 0.3 percent ahead of gains by U.S. regional banks later in the day. European stock futures fell 0.7 percent, while FTSE futures fell 0.9 percent.
Stock sentiment has also taken a hit due to escalating trade tensions between China and the US. China on Thursday accused the United States of sowing panic over rare earth controls and rejected a White House call to roll back the restrictions.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9 percent, moving into negative territory for the week. Japan’s Nikkei index lost 1.0 percent as the banking index fell.
Taiwan’s shares fell 0.9 percent even after chipmaker TSMC posted record quarterly profits and issued an optimistic forecast on artificial intelligence spending.
China’s blue chips and Hong Kong’s Hang Seng lost 1.4 percent.
Credit concerns and bets on a rate cut weakened the US dollar, which fell 0.6 percent weekly against major currencies to a ten-day low of 98.24.
The yen and Swiss franc gained the most value, with increases of 0.7 percent and 0.9 percent on the week.
Bank of Japan Governor Kazuo Ueda said the central bank will examine various data when deciding whether to raise interest rates this month.
Liberal Democratic Party (LDP) leader Sanae Takaichi is still trying to persuade her allies to help clinch the prime ministerial vote expected next week.
Treasuries are poised for a third consecutive week of gains. Two-year Treasury yields fell two basis points on Friday to a three-year low of 3.4040 percent, heading for a third straight week of declines.
Ten-year Treasury yields also fell two basis points to 3.959 percent, falling 10 basis points for the week.
Oil prices extended losses after falling 1.0 percent overnight after US President Donald Trump said he and Russian President Vladimir Putin agreed to meet in Hungary soon to discuss ending the war in Ukraine.
US crude fell 0.7 per cent to US$57.04 (A$A87.75) per barrel, while Brent fell 0.7 per cent to US$60.63 (A$A93.27).
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