How Troubles at US Banks and Geopolitical Tensions Rattle Asian Markets with Investor Nerves on Edge

Asian Stocks Fall Amidst Concerns Over US Bank Troubles and Economic Growth

The issues at First Republic Bank, a US lender whose market value suddenly dropped by as much as 41% in a dramatic sell-off, have alarmed investors in Asian markets. Due to the bank's issues, there are worries that the largest economy in the world may expand less than anticipated, which would cause Asian markets to decrease.

While Japan's Nikkei fell 0.4%, MSCI's largest index of Asia-Pacific equities outside of Japan fell 0.3%. Hong Kong's Hang Seng Index fell 0.3% as China's blue chips remained unchanged. The biggest brokerage in Japan, Nomura, had its shares drop by more than 7% after reporting a steep drop in quarterly net earnings.

Geopolitical issues have also cast a shadow over markets. US Commerce Secretary Gina Raimondo recently stated that Chinese cloud computing companies like Huawei Cloud and Alibaba Cloud could pose a threat to US security. She has vowed to review a request to add them to an export control list.

Additionally, geopolitical concerns have had an impact on the markets. Chinese cloud computing firms like Huawei Cloud and Alibaba Cloud, according to US Commerce Secretary Gina Raimondo, may be a security risk to the US. She promised to examine a request to include them on an export restriction list.

The S&P 500 and Dow both witnessed decline in economically sensitive sectors, compared to Nasdaq's 0.5% rise in the technology sector, signaling growing recessionary anxiety. The fact that new orders for important US-made capital goods declined more than anticipated in March suggests that company expenditure on equipment likely slowed first-quarter economic growth. The forecast for growth is currently at an annualized 1.1%, dramatically down from 2.5% only a week ago, according to the Atlanta Federal Reserve's GDPNow, which monitors how incoming data effects anticipated gross domestic product (GDP) for the current quarter.

Data for US first-quarter GDP are coming later today, and economists surveyed by Reuters predict a growth of 2%, so there may be a negative risk. Wells Fargo reduced its prediction for US GDP growth from 1.0% to 0.8%. The probability that the Federal Reserve would increase interest rates by 25 basis points (bps) at its May meeting next week is priced into Fed funds futures at roughly 80%, but anticipating rate reduction of 45 bps by the end of the year is also taken into account.

The currency markets have been fairly quiet, with the euro trading around its best level in more than a year at US$1.104, thanks to wagers that the European economy may improve after Germany increased its growth projection for this year. On new worries about a US slowdown, the dollar index, which compares the currency to six main competitors, fell to 101.4.

The two-year yield remained at 3.9345%, while the ten-year yield was 3.4391% for US Treasuries. In anticipation of a potential Washington vote on raising the US debt ceiling, one-month Treasury rates plunged. In the meanwhile, oil made some gains after falling almost 4% due to recessionary concerns. While Brent crude prices increased by 0.5% to US$78.09 per barrel, US crude futures barely increased by 0.3% to US$74.5 per barrel. Gold's price per ounce was steady at $1,990.04.

Overall, it seemed as though the world's financial markets were in flux, with investors being especially alert to any indications of a slowdown in the global economy. It is yet unclear how the markets will respond in the next weeks given that worries about US economic growth and geopolitical tensions in China continue to worry investors.