An Asian equity gauge slid more than 1.5%, dragged down by finance stocks after banks came under fire in the US following the collapse of Silvergate Capital Corp. Asian shares related to cryptocurrencies slumped and MSCI China Index also fell and erased all of its gains for this year.
Silicon Valley-based lender SVB Financial Group was at the centre of the storm Thursday, losing 60% after taking steps to shore up its capital position, stoking concern that soaring interest rates are eroding balance sheets.
The yen crept higher after slipping during early trading today. The currency gained the most in a month on Thursday on the back of the deteriorating risk sentiment and in the lead up to Bank of Japan Governor Haruhiko Kuroda’s final policy announcement.
The central bank is leaning toward monitoring the impact of recent tweaks to its stimulus programme rather than making another adjustment, according to people familiar with the matter.
“We expect continued policy normalisation 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 JP Morgan 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 today. 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 today’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 Federal Reserve is “going to have to position themselves to potentially raise by a half a percentage point very quickly” if the payrolls data come in hotter than expected, especially with the impending release of inflation print next week, said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, on Bloomberg Television.
Cryptocurrencies dropped after pulling up slightly early today. 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:
Bank of Japan policy rate decision, Friday
US nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 11:16 a.m. Tokyo time. The S&P 500 fell 1.8%
Nasdaq 100 futures fell 0.6%. The Nasdaq 100 fell 1.8%
Japan’s Topix index fell 1.3%
Hong Kong’s Hang Seng Index fell 2.5%
China’s Shanghai Composite Index fell 0.9%
Australia’s S&P/ASX 200 Index fell 1.8%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0594
The Japanese yen rose 0.2% to 135.93 per dollar
The offshore yuan was little changed at 6.9737 per dollar
The Australian dollar fell 0.2% to $0.6578
Cryptocurrencies
Bitcoin fell 0.7% to $20,085.25
Ether fell 0.3% to $1,428.64
Bonds
The yield on 10-year Treasuries declined seven basis points to 3.83%
Japan’s 10-year yield fell 0.5 basis point to 0.495%
Australia’s 10-year yield declined 11 basis points to 3.59%
Commodities
West Texas Intermediate crude fell 0.4% to $75.43 a barrel
Spot gold was little changed