Asian shares have plunged since Tuesday, with Japanese financials leading losses as concerns over a U.S. banking crisis gripped investors ahead of key inflation data due later in the day.
Asian stock news

 
The fall in US lenders Silicon Valley Bank and Signature Bank widened overnight, despite government efforts to shore up confidence. The sell-off hit US regional bank shares and traders who had rushed out of bets on a US interest rate hike thought the Fed would think twice now. The 2-year US Treasury yield rallied the most since 1987, and US interest rate futures also jumped, with markets pricing in a rate hike of up to 50 basis points next week and a cut of almost 70 basis points by the end of the year. On Tuesday, MSCI’s broadest index of Asia-Pacific shares outside Japan fell about 0.5% in early trade, with Aussie financials the biggest drag. Japan’s Nikkei fell about 2%. The Tokyo Stock Exchange index also fell about 7.4% in early trade, putting it on track for its steepest decline in three years. Damien Boyen, chief equity strategist in Sydney, said the bank run had begun and the interbank market was under pressure. Arguably, liquidation measures should have stopped this dynamic, but Main Street has been watching the news, not the financial channels. Fear has set in and higher uncertainty has itself triggered its own de-leveraging and de-risking dynamics. According to investing.com, the VX index, dubbed Wall Street’s “fear gauge,” surged higher overnight and other market stress indicators showed early signs of strain. The S&P banking index plunged 7%, its biggest one-day percentage drop since June 2020. Big banks J.P. Morgan, Citigroup, Wells Fargo all fell, but regional stocks were hardest hit by First Republic Bank, down 63%, Western Alliance, down 47% and PacWest, also down 21%. In Tokyo, Resona Holdings led the losses with a 9% drop, followed by Sumimoto Mitsui Financial Group, down 8%. Joe Biden is seeking to reassure depositors by vowing to ensure the safety of the US banking system and the Fed is set to announce a new funding mechanism on Sunday to help banks find cash. Banks can now borrow at par rather than the lower market value of their bond portfolios. Elsewhere, a dramatic repricing of US interest rate expectations has sent the dollar lower. It last hovered around 133.25 yen and $1.0718 per euro. The tensions have capped oil prices, with Brent crude futures pinned near $80 a barrel. US inflation data is due later in the day, which is sure to be volatile, even if investors see the Fed as prioritizing financial stability. NatWest strategists said the prospect of markets “looking through” stronger US data in the current environment could reduce the risk of a dollar rise through CPI, which would mark a significant shift from the data-driven environment of just a few days ago.

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