SINGAPORE- Asia’s share markets slid on Tuesday, with financial stocks in Tokyo leading losses as fear of a US banking crisis had investors fleeing the sector and slashing the interest rate outlook even ahead of US inflation data due later in the day.
Japan’s Nikkei dropped 2 percent. The Tokyo Stock Exchange banks index fell more than 5 percent, setting it on course for its steepest drop in nearly six months. Banks shares in Singapore and Australia fell. Hong Kong shares in HSBC and Standard Chartered dropped more than 5 percent.
Markets remained nervous following the collapse of Silicon Valley Bank last week and the failure of New York’s Signature Bank over the weekend even after the US government took steps to shore up systemic confidence.
Heavy selling hit US regional bank stocks overnight and traders raced away from bets on US rate hikes, reckoning the instability would turn policymakers cautious. S&P 500 futures stabilized in Asia trade and were last up 0.6 percent.
Two-year Treasuries steadied after their biggest rally since 1987, and US interest rate futures eased slightly after soaring in New York, when markets priced out any chance of a 50 basis point Fed hike next week.
“Bank runs have started (and) interbank markets have become stressed,” said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey.
“Arguably, liquidity measures should have stopped these dynamics, but Main Street has been watching news and queues — not financial plumbing,” he said. “Fear has started to feed on itself, and higher uncertainty by itself has triggered its own de-leveraging and de-risking dynamics.”
Overnight the VIX volatility index, nicknamed Wall Street’s “fear gauge”, shot higher and other indicators of market stress showed early signs of strain. The S&P banking index fell 7 percent, its largest one-day drop since June 2020.
In the Asia day stocks were attempting to stabilize around lunchtime and had lifted from mid-morning lows. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.2 percent.
Meanwhile bonds in Australia and Korea enjoyed their best gains in a decade on the radically changed outlook. — Reuters
