THE ASSOCIATED PRESS
March 28, 2023 at 17:30 JST
A person wearing a mask stands in front of an electronic stock board showing the Nikkei 225 index at a securities firm on March 27 in Tokyo. (AP Photo)
Asian shares were mostly higher on Tuesday as investors got some relief from worries over troubled U.S. banks with a planned takeover of failed Silicon Valley Bank.
Japan’s benchmark Nikkei 225 lost 0.1% to 27,456.98. Australia’s S&P/ASX 200 jumped 1.1% to 7,036.20. South Korea’s Kospi added 0.4% to 2,419.43. Hong Kong’s Hang Seng rose nearly 0.4% to 19,644.68, while the Shanghai Composite inched up less than 0.1% to 3,249.39.
“Asian equities were positive on Tuesday, lifted by mostly higher major indices in the previous session. Receding fears surrounding the banking crisis and surging oil prices led to solid risk-taking flows,” Anderson Alves at ActivTrades said in a report.
Markets have been in turmoil following Silicon Valley Bank’s collapse, the second-largest U.S. bank failure in history, earlier this month, and then the third-largest failure, by New York-based Signature Bank.
Investors have been hunting for which banks could be next to fall as the system creaks under the pressure of much higher interest rates.
On Wall Street, the S&P 500 eked out a 0.2% gain to 3,977.53 after having been up by as much as 0.8%. Banks and energy stocks led the gainers in the benchmark index, outweighing losses in technology and communications companies.
The Dow Jones Industrial Average rose 0.6% to 32,432.08, while the Nasdaq composite fell 0.5%, to 11,768.84, reflecting losses in Google parent Alphabet and other tech companies. Gainers outnumbered decliners on the New York Stock Exchange by nearly 3-1. The S&P and Nasdaq are coming off two straight weekly gains.
First Citizens Bank’s stock soared 53.7% after it said it would buy most of Silicon Valley Bank, whose failure sparked the industry’s furor earlier this month. As part of the deal, the Federal Deposit Insurance Corp. agreed to share some of the losses that may arise from some of the loans First Citizens is buying.
Other banks that investors have highlighted as the next potential victims of a debilitating exodus of customers also strengthened.
First Republic Bank jumped 11.8% and PacWest Bancorp rose 3.5%. Most of the focus in the U.S. has been on banks that are below the size of those that are seen as “too big to fail.”
A broader worry has been that all the weakness for banks could cause a pullback in lending to small and midsized businesses across the country. That in turn could lead to less hiring, less growth and a higher risk of a recession. Many economists were already expecting an economic downturn before all the struggles for banks.
“Unfortunately this is what happens when you tighten policy that quickly,” Amanda Agati, chief investment officer of PNC Asset Management Group, said about the past year’s swift rise in interest rates. “Things break in the system. Some of the weakest links are starting to show up.”
The Federal Reserve has pulled its key overnight rate to a range of 4.75% to 5%, up from virtually zero at the start of last year. It indicated last week that the troubles in the banking system could end up acting like rate hikes on their own, by slowing lending.
Huge, quick swings in expectations for the Fed have caused historic-sized moves in the bond market.
Yields jumped Monday in their latest lunge. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.53% from 3.37% late Friday. It was above 4% earlier this month.
Lower rates can act like steroids for stocks, and technology and other high-growth stocks tend to get a particularly big boost. That has helped the S&P 500, which is dominated by such Big Tech stocks as Apple and Microsoft.
Other areas of the market that don’t benefit from such Big Tech stocks have been weaker. The Russell 2000 index of smaller stocks, for example, is on track for a 7.6% loss this month versus a 0.2% gain for the S&P 500.
The Russell outgained the broader market Monday, however, adding 1.1%, to 1,753.67.
In energy trading, benchmark U.S. crude lost 2 cents to $72.79 a barrel in electronic trading on the New York Mercantile Exchange. It gained $3.55 to $72.81 per barrel on Monday.
Brent crude, the international standard, fell 21 cents to $77.91 a barrel.
In currency trading, the U.S. dollar fell to 130.62 Japanese yen from 131.56 yen. The euro cost $1.0813, up from $1.0804.
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