TOKYO – Shares fell Friday in Asia as worries over turmoil in the banking sector and recession risks overshadowed gains on Wall Street.
Benchmarks declined in most major markets, while U.S. futures were higher. Oil prices fell.
Investors are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.
The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.
Regional banks shares in Asia were modestly lower Friday, with HSBC Holdings plc losing 2.7% in Hong Kong while mid-sized Japanese bank Resona Holdings declined 3%.
Shares in Japanese energy and electronics company Toshiba Corp. gained 4.3% after it announced late Thursday that it had accepted a $15 billion tender offer from a buyout fund made up of the nation’s major banks and companies. If regulators approve it, the proposed buyout by private equity firm Japan Industrial Partners would be a major step in troubled Toshiba’s yearslong turnaround effort, allowing it to go private.
Tokyo's Nikkei 225 index lost 0.1% to 27,385.25 and the Kospi in Seoul gave up 0.4% to 2,414.96. Hong Kong's Hang Seng slipped 0.8% to 19,885.45 and the Shanghai Composite index edged 0.1% lower, to 3,265.55.
Australia's S&P/ASX 200 shed 0.2% to 6,955.20. Shares rose in Bangkok, Mumbai and Taiwan.
On Thursday, the S&P 500 added 0.3% for its third gain in four days, closing at 3,948.72. The Dow Jones Industrial Average gained 0.2% to 32,105.25 after seeing an early gain of 481 points evaporate. The Nasdaq composite held up better thanks to strength in technology shares, gaining 1% to 11,787.40.
Big technology and other high-growth stocks were among the strongest on Wall Street. Nvidia rose 2.7%, and Microsoft gained 2%.
Stocks fell sharply the day before after the Federal Reserve indicated that while the end may be near for its hikes to interest rates, it still doesn’t expect to cut rates this year. Fed Chair Jerome Powell also insisted the Fed could keep raising rates if inflation stays high.
Markets were also still mulling comments from Treasury Secretary Janet Yellen, who said the government is not considering blanket protections for all customers at all banks. She did say the government will make all depositors whole at banks, on a case-by-case basis, if failing to do so would pose a risk for the broader system.
Implicit in that is perhaps the hint that any bank failure could be seen as such a systemic risk. Failures at both Silicon Valley Bank and Signature Bank met that criteria. Depositors were promised all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.
Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank fell 6% after giving up a gain of nearly 10%.
The Fed’s Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point Wednesday instead of more. A pullback in lending could act almost like a rate hike on its own, he said.
In markets abroad, stocks in London fell 0.9% after the Bank of England also raised its key rate by a quarter of a percentage point. Stocks were mixed elsewhere across Europe and Asia.
On Wall Street, shares of Coinbase Global fell 14.1% after the cryptocurrency trading platform said it had been warned by the Securities and Exchange Commission that it could face charges of violating U.S. securities laws.
In other trading Friday, U.S. benchmark crude oil slipped 1 cent to $69.95 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 94 cents to $69.96 per barrel.
Brent crude, the pricing basis for international oil, lost 5 cents to $75.45 per barrel.
The U.S. dollar fell to 130.33 yen from 130.83 yen. The euro slipped to $1.0831 from $1.0833.