Global markets spooked by troubled US start-up bank, Singapore stock index closes down 1.2%

SINGAPORE – Falling bank stocks drove global markets lower on Friday, while bonds rallied and expectations of interest rate rises in the United States were reduced after a Silicon Valley start-up lender unleashed fears of broader banking system stress.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.9 per cent with banks and Hong Kong technology stocks leading losses.

In early trade, Europe’s stock markets tumbled as a global banks sell-off accelerated before key US employment data.

Frankfurt’s Dax index tanked 1.8 per cent, with Deutsche Bank slumping 10 per cent and Commerzbank down 5 per cent.

Paris’ CAC 40 lost 1.9 per cent, with BNP Paribas, Credit Agricole and Societe Generale down by between 4 per cent and 5 per cent.

London’s FTSE 100 index dropped 1.6 per cent, with shares in Barclays, HSBC, Lloyds and NatWest shedding as much as 5 per cent.

In Asia, Tokyo’s Nikkei slid 1.7 per cent, while Hong Kong’s Hang Seng Index sank 3 per cent and the Shanghai Composite dropped 1.4 per cent.

Australia’s S&P/ASX 200 Index slid 2.3 per cent, while South Korea’s Kospi index fell 1 per cent.

In Singapore, the Straits Times Index closed down 1.2 per cent, with the trio of local banks retreating. DBS Bank slipped 0.3 per cent to $33.18, while OCBC Bank declined 1.4 per cent to $12.37 and UOB fell 2.2 per cent to $28.68.

The moves followed news late on Wednesday that SVB Financial Group, parent of start-up-lender Silicon Valley Bank, would seek to raise US$2.25 billion (S$3 billion) after higher-than-expected “cash burn” from clients, falling deposits and rising costs of capital. The announcement came hours after crypto-focused lender Silvergate Bank said it was closing down.

SVB stock was still sliding after the bell and lost about 70 per cent of its value in 24 hours. JPMorgan Chase lost 5.4 per cent, Citigroup was down 4.1 per cent and big lenders in Asia and Australia slid – albeit to a lesser extent – on Friday morning.

“I think there is speculation that there are wider problems within the US banking system, or there is that potential, and that has caused a rethink of Fed policy,” said ING economist Robert Carnell in Singapore.

“The thinking is that if what the Fed is doing is causing this distress, then perhaps it won’t be doing that much more,” he said.

“But it is a big move on the back of what seems to be some fairly woolly speculation... which just shows how antsy the markets are right now, and this has spilled into all the other markets,” Mr Carnell added.

The yen weakened after the Bank of Japan (BOJ) opted to keep its ultra-low interest rates on Friday, during governor Haruhiko Kuroda’s last meeting in charge, as expected.

The currency was last down about 0.4 per cent at 136.63 per US dollar after a knee-jerk drop of as much as 0.6 per cent.

Elsewhere, surprisingly high jobless claims in the US offered a weak entree for the country’s broader employment data due later on Friday, putting some pressure on recent US dollar gains.

The figures loom as a crucial barometer of the health of the US labour market and the direction of interest rates after Federal Reserve chair Jerome Powell warned that rates could rise further and faster if data shows that is needed to get a grip on inflation.

Fed funds futures also rallied strongly, pulling the market-implied peak in US rates from above 5.6 per cent to just below 5.5 per cent, and pricing about a 50 per cent chance of a 50 basis-point Fed hike this month, down from more than 70 per cent a day earlier. REUTERS