Asian stocks fall on renewed fears over US regional banks

Asian stocks declined while US futures steadied on Wednesday, as renewed fears about the health of regional banks in the US dented market sentiment ahead of a meeting of the Federal Reserve this week.

South Korea’s Kospi declined 0.8 per cent, Hong Kong’s Hang Seng index dropped 1.8 per cent and Australia’s S&P/ASX 200 fell 1.2 per cent. Markets in mainland China and Japan were closed for holidays.

US futures were mixed, with contracts for the S&P 500 down 0.1 per cent and the tech-heavy Nasdaq Composite flat.

Concerns about the health of the global financial sector have returned this week after JPMorgan purchased all of First Republic’s $93.5bn of deposits and most of its assets in a regulator-orchestrated deal.

The takeover, which culminated in regulators closing the California-based lender, represented the second-largest banking failure in US history. It followed the collapse of Silicon Valley Bank, Signature Bank and Silvergate, as well as the Swiss government-brokered takeover of Credit Suisse.

The KBW Regional Banking index lost 5.5 per cent in the US on Tuesday, its worst session since March 17, with steep losses for PacWest and Western Alliance. The benchmark S&P 500 fell 1.2 per cent and the Nasdaq Composite slipped 1.1 per cent.

Investors anticipate the Fed will boost rates by another 0.25 percentage points at its Wednesday meeting, taking the federal funds rate to a target range of 5 to 5.25 per cent, but there is less consensus on what policymakers will do after that.

The picture has been complicated by recent data suggesting an economic slowdown, including the lowest number of job openings in almost two years.

Investors are also looking to the European Central Bank, where rising eurozone inflation has raised concerns that it will increase benchmark rates at its meeting this week.

The yield on the US 10-year Treasury note, which underpins global borrowing costs, was flat at 3.44 per cent on Wednesday, after falling 0.13 basis points the previous day.

The yield on the two-year note, which closely mirrors short-term interest rate expectations, slipped 0.01 percentage points to 3.97 per cent. Yields move inversely to price.

Oil prices also steadied after falling around 5 per cent on Tuesday on signs of cooling US and Chinese demand. Brent crude, the international benchmark fell 0.1 per cent to trade at $75.28 per barrel, while US marker West Texas Intermediate slipped 0.1 per cent to $71.58.

The dollar slipped 0.2 per cent against a basket of other currencies, with the Japanese yen and Korean won gaining 0.4 per cent and 0.2 per cent to trade at ¥136.03 and Won1339.38 per dollar, respectively.