Asian shares headed for declines after US equities fell and government bonds and the dollar rallied as fresh turmoil at Credit Suisse Group AG roiled markets.
(Bloomberg) — Asian shares headed for declines after US equities fell and government bonds and the dollar rallied as fresh turmoil at Credit Suisse Group AG roiled markets.
Australian and Japanese stocks and Hong Kong futures dropped. The financial sector was among the hardest hit in Japan’s Topix Index and Australia’s S&P/ASX 200 benchmark. Contracts for US stocks showed fledgling signs of stability after the S&P 500 fell 0.7% Wednesday. The US benchmark pared earlier losses after Switzerland’s central bank said Credit Suisse would receive a liquidity backstop if needed.
Tech stocks offered a bright spot. Nasdaq 100 futures advanced after a gain on Wednesday as traders forecast interest rates to climb less than previously expected.
The KBW Bank Index, one of the broadest measures of the US banking system, fell 3.6%, undoing a rally from the prior session. First Republic Bank shares fell more than a fifth after being cut to junk by two credit firms, dragging its decline over the past week to more than 70%. JPMorgan, the largest US bank by value, fell 4.7%.
Australian and New Zealand 10-year yields fell more than 10 basis points Thursday. US Treasury yields fell sharply Wednesday as traders rushed to safety. Benchmark 10-year yields tumbled 23 basis points to the lowest level in a month while the policy-sensitive two-year yield dropped 36 basis points, reflecting a further shift in US interest rates expectations. They were little changed early Thursday in Asia.
Traders were almost evenly split on whether the Federal Reserve will increase interest rates when it meets next week. Market pricing now suggests the Fed will soon pivot and will cut rates by as much as 1% by the end of the year.
Bob Michele, chief investment officer for JPMorgan Asset Management, now expects the Fed to pause rate hikes next week and said a recession is “inevitable”.
Read: Recession Risk Mounts as Credit Suisse Crushes Soft-Landing Hope
“This episode is not the same as 2008. It is not a credit crisis, but an asset crisis,” said Nicholas Ferres, chief investment officer of Vantage Point Asset Management. “The challenge now that has been uncovered is the mark-to-market fantasy of venture capital, private equity and commercial real estate assets.”
Some investors used the dip in rates forecasts to buy rates-sensitive stocks, including tech. The Nasdaq 100 gained 0.4% for its third consecutive advance as Netflix Inc., Meta Platforms Inc., Microsoft Corp., and Amazon.com Inc. rallied. Nasdaq 100 futures inched higher in early Thursday trading.
An index of the dollar was steady after it rallied almost 1% as the greenback gained against all of its developed-market peers except the Japanese yen. The Swiss franc sank more than 2% against the greenback while gold reversed an earlier drop. In early Asia trading Thursday, the yen rallied to highest level relative to the dollar in more than a month.
Read: Summers Says Fed, ECB to Judge Disinflationary Impulse Scale
Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management, said the threat to the broader financial industry and economy was largely contained, in contrast to the 2008 financial crisis.
“Remember, in the great financial crisis, there was a lot of this that was about cross-counterparty credit risk,” she told Bloomberg Television. “This is less about immediate contagion.”
Key events this week:
- Eurozone rate decision, Thursday
- US housing starts, initial jobless claims, Thursday
- Janet Yellen appears before the Senate Finance Committee, Thursday
- US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:06 a.m. Tokyo time. The S&P 500 fell 0.4%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 0.4%
- Hang Seng futures fell 1.9%
- Japan’s Topix fell 2.1%
- Australia’s S&P/ASX 200 fell 1.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0582
- The Japanese yen rose 0.5% to 132.79 per dollar
- The offshore yuan was little changed at 6.8918 per dollar
Cryptocurrencies
- Bitcoin was little changed at $24,402
- Ether rose 0.3% to $1,657.37
Bonds
- The yield on 10-year Treasuries was little changed at 3.45%
- Australia’s 10-year yield declined 13 basis points to 3.30%
Commodities
- West Texas Intermediate crude rose 1.3% to $68.47 a barrel
- Spot gold rose 0.2% to $1,922.67 an ounce
This story was produced with the assistance of Bloomberg Automation.
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