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Asian stocks decline; treasuries rally further: markets wrap

Asian stocks decline; treasuries rally further: markets wrap
The Bitcoin logo on a screen in Hong Kong, China, on Wednesday, 21 December 2022. (Photo: Paul Yeung / Bloomberg via Getty Images)

Asian shares slumped on Friday following a sharp decline on Wall Street amid concern that pockets of trouble in the US banking sector could portend broader dangers.

Treasuries extended their rally while the yen weakened as the Bank of Japan kept policy unchanged.

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.

Read more: Read more: Wall Street’s Favorite Trade Is Hammered in Bank Stock Meltdown

The Bank of Japan maintained its policy balance rate and kept its 10-year yield target at the same level. The central bank was previously said to lean 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 JPMorgan 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 on Friday. 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 Friday’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 on Friday. 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. BM/DM

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