TOKYO (AP) — Asian stocks fell largely on Monday, rocked by a Wall Street fall that sparked concerns that the biggest U.S. bank failure in nearly 15 years could impact the entire world.
The Japanese benchmark Nikkei 225 fell 1.2% in morning trading to 27,817.43. The Australian S&P/ASX 200 fell 0.6% to 7,104.30. The South Korean Kospi was little changed at 2,394.10.
Before trading began in Asia, the U.S. Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients will be protected and have access to their money, and announced measures to protect the bank’s clients. and prevent more bank runs.
Regulators closed Silicon Valley Bank on Friday amid a run on the bank, the second largest bank failure in the US after Washington Mutual’s 2008 bankruptcy. They also announced on Sunday that New York-based Signature Bank had seized was taken after becoming the third largest bank failure in US history.
After two bank failures, concerns about financial stability and liquidity issues dominated the market landscape, said Stephen Innes, managing partner at SPI Asset Management in Hong Kong.
He said traders unnerved by the weekend’s news could create “a ready-made Monday opening.”
“With the market likely heading into a more turbulent period where US inflation is on a collision course with the Bank’s ‘theatre of tragedy’, this is probably not the best time for investor euphoria,” said Innes.
Shares plummeted on Wall Street on Friday, with the S&P 500 falling 1.4% to finish its worst week since September.
The Dow Jones Industrial Average fell 345 points, or 1.1%, while the Nasdaq composite fell 1.8%. The S&P 500 fell 56.73 points to 3,861.59. The Dow lost 345.22 to 31,909.64 and the Nasdaq fell 199.47 to 11,138.89.
Some of the sharpest declines on Wall Street last week came from the financial sector. First Republic Bank fell 14.8%, while Charles Schwab lost another 11.7% after falling 12.8% on Thursday. Larger banks, which were stress-tested by regulators after the 2008 financial crisis, held up better. JPMorgan Chase rose 2.5%.
Bank issues sold off in Tokyo trading, with MUFG Bank falling 3% before recovering to a drop of about 1%, following such declines on Wall Street.
Concerns have mounted recently that interest rates will turn higher than expected after the Fed Reserve said it could accelerate the size of its rate hikes again. The Fed is mainly focusing on wage growth in its fight against inflation. It worries that excessive profits could create a vicious cycle that exacerbates inflation.
Traders now largely expect the Fed to stick with a modest 0.25 point hike. Last month, the Fed slowed to that pace after previous increases of 0.50 and 0.75 points, respectively. The Fed has already hiked rates at its fastest pace in decades and taken other measures to undo its massive support to the economy during the pandemic.
In energy trading, benchmark US crude rose 48 cents to $77.08 a barrel. Brent oil, the international standard, rose 48 cents to $83.15 a barrel.
In currency trading, the US dollar fell from 134.96 yen to 134.36 Japanese yen. The euro was priced at $1.0699, up from $1.0643.
