Business Maverick

Business Maverick

Stocks fluctuate as bank jitters cast long shadow: markets wrap

Stocks fluctuate as bank jitters cast long shadow: markets wrap
An electronic stock board outside a securities firm in Tokyo, Japan, on Monday, 21 November 2022. (Photo: SeongJoon Cho/Bloomberg)

A gauge of Asian equities was slightly lower in choppy trading Friday as the malaise hanging over the banking sector cast a shadow over the economic outlook and markets. 

Shares swung between gains and losses in Hong Kong, as did US futures, while contracts for Europe remained lower. Financials were among the worst-performing sectors on MSCI Inc’s Asia-wide index.

Despite the Nasdaq 100 pushing near to the threshold of a bull market Thursday, banking stocks missed out on the rally and a measure of US financial heavyweights sank to the lowest since November 2020. That tone carried over into Asia.

Treasury yields remained volatile and on course for a third day of declines while the dollar steadied after weakening in the previous six sessions as investors positioned for the Federal Reserve to slash interest rates later this year. Short-dated Treasuries posted outsized moves for an 11th straight trading day Thursday and fluctuated on Friday. 

Traders remain wary of problems in the banking sector that have built up during Fed’s rapid hiking cycle. The US lenders slumped even after Treasury Secretary Janet Yellen told lawmakers she was prepared for further steps to protect deposits if needed.

Government bond yields added to opening declines in Australia and New Zealand. Japan’s benchmark 10-year bond yield fell 1.5 basis points to 0.28%.

The yen rose, partly on haven demand, as well as the outlook for monetary policy. A benchmark of the nation’s inflation slowed for the first time in 13 months but gains in prices excluding fresh food and energy suggested stronger underlying inflationary pressures. This supports market speculation that incoming BOJ governor Kazuo Ueda may have to move toward policy normalisation sooner rather than later.

“The push-and-pull between financial market stability and inflation that is receding more slowly than anyone would prefer will further complicate an already significant challenge for the Fed, increasing the risk of a policy misstep and keeping the door open for a potential recession on the horizon,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Comments by Yellen about additional deposit actions, if warranted, offered investors comfort while they digested earlier rate hikes by the Bank of England, Norges Bank and Swiss National Bank and hawkish comments by European Central Bank officials. BM/DM

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