MELBOURNE – Shares in Asia are set to decline after Wall Street fell on renewed concern about the banking sector before a Federal Reserve decision on Wednesday where US policymakers are expected to raise interest rates.
Equity futures in Japan, Australia and Hong Kong all declined, while US contracts edged lower in early Asian trade. The S&P 500 slipped 1.2 per cent on Wednesday, with the financial sector the second-worst performer after energy.
US regional lenders PacWest Bancorp and Western Alliance Bancorp both slid at least 15 per cent just a day after J.P. Morgan Chase’s acquisition of First Republic Bank seemed to bolster confidence in the sector.
The decline in energy stocks followed a 5.3 per cent drop for the US oil price, the biggest decline since July, in a sign of unease about global growth. The decline stabilised early on Wednesday.
Treasuries rallied across the curve. The two-year note yield fell 18 basis points to below 4 per cent, and the 10-year yield slipped 14 basis points to 3.42 per cent. The Bloomberg dollar index dropped.
US data showed a cooling in the labour market, with the number of job openings in March dropping to the lowest level in two years.
The decline in available positions comes before the Fed’s interest rate decision where it is forecast to raise borrowing costs by 25 basis points. Market pricing indicates that the increase will mark the peak of the tightening cycle before weaker growth prompts the central bank to cut rates later in the year.
“Wall Street is quickly hitting the sell button as banking turmoil appears it is not going away any time soon,” said Mr Ed Moya, senior market analyst at Oanda in New York. “Risk appetite did not stand a chance as traders focused on lingering doubts over the regional banks, rising recession odds and growing risks that the US could default on its debt next month.”
A plan to resolve the US debt ceiling issue was no closer after US Treasury Secretary Janet Yellen said on Monday that the United States may run out of money at the start of next month, underscoring the uncertain mood.
Advanced Micro Devices, the second-largest maker of computer processors, announced a lackluster sales forecast in its first-quarter earnings report. Ford Motor beat profit estimates and Starbucks beat sales estimates as US and China transactions increased. BLOOMBERG