SINGAPORE, March 10 (Reuters) – Falling bank stocks sent Asian markets tumbling on Friday as bonds rallied and expectations of a U.S. interest rate hike were reduced after a surprise fundraise from a Silicon Valley start-up lender sparked fears of wider strains on the banking system.
The yen weakened and Japanese government bond yields plunged after the Bank of Japan opted to keep stimulus parameters stable at Governor Haruhiko Kuroda’s latest meeting in charge, as expected.
The benchmark 10-year JGB yield, which the BOJ pegs less than 50 basis points on either side of zero, moved sharply away from that ceiling to last stand at 0.445%. The yen was last down around 0.4% at 136.615 to the dollar after falling as much as 0.6%.
The Japanese Nikkei (.N225) pared declines to stay down around 1% from a loss of 1.23% before 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 Hong Kong tech stocks leading the losses.
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S&P 500 futures fell 0.57%, following the spot index (.SPX) down 1.8% and below its 200-day moving average.
The US dollar edged higher and short-term Treasuries extended strong gains overnight, pushing two-year yields down another 12 basis points to 4.7837% in Tokyo trading.
Fed funds futures also rebounded strongly, taking the implied peak in the US rates market from over 5.6% to just under 5.5%, and pricing around a 50% chance of a Fed hike of 50 basis points this month, compared to more than 70% a year. day earlier.
The sharp moves followed SVB Financial Group (SIVB.O), parent company of startup lender Silicon Valley Bank, noting higher than expected “cash burn” from customers, falling deposits and rising costs of capital. It announced a stock sale hours after crypto-specialty lender Silvergate (SI.N) announced its closure.
SVB stock was still slipping after the bell and lost around 70% of its value in 24 hours. Shares of major banks were dragged lower, with JP Morgan Chase & Co (JPM.N) losing 5.4%, Citigroup (CN) down 4.1% and major lenders in Asia and Australia down – albeit to a lesser extent – on Friday morning.
“I think there’s speculation that there are broader issues within the US banking system, or there’s this potential, and that’s prompted an overhaul of Fed policy,” the official said. ING Economist Rob Carnell in Singapore.
“The idea is that if what the Fed is doing is causing this distress, then maybe it won’t be doing much more,” he said.
“But it’s a big step based on what appears to be pretty loose speculation…which shows how anxious the markets are right now, and it’s spilled over to every other market.”
Surprisingly high jobless claims in the US offered a weak entry for broader US employment data later on Friday, putting some pressure on the dollar’s recent gains.
The numbers emerge as a crucial barometer of the health of the US labor market and the direction of interest rates after Fed Chairman Jerome Powell warned that rates could rise further and faster if data show necessary to control inflation.
Bitcoin was taking losses just above the psychological $20,000 level as the fallout from Silvergate’s demise weighs on the overall mood for digital assets.
Brent futures fell to $81.19 a barrel while gold was pegged at $1,830 an ounce.
Editing by Simon Cameron-Moore and Kim Coghill
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