Asian stock markets tumbled Thursday after Wall Street sank as a plunge in Credit Suisse shares reignited worries about a possible bank crisis following the failure of two U.S. lenders.
Shanghai, Tokyo, Hong Kong and Sydney slid as Asian bank stocks fell, reversing Wednesday's gains. Oil prices rose.
Wall Street's benchmark S&P 500 lost 0.7% on Wednesday after being down as much as 2.1% at one point following a 30% fall in Credit Suisse's share price. That fueled jitters about global banks that are under strain from interest rate hikes by the Federal Reserve and other central banks to cool inflation.
The Credit Suisse decline “shakes already fragile investor sentiment,” said Venkateswaran Lavanya of Mizuho Bank in a report.
The Nikkei 225 in Tokyo retreated 0.9% to 26,998.07. Mizuho Bank was down 3.9%, while Japan's No. 5 bank, Resona Holdings, lost 4.8%.
The Hang Seng in Hong Kong shed 1.4% to 19,271.65. Standard Chartered Plc lost 2.5% and HSBC was 2.5% lower.
The Shanghai Composite Index lost 0.5% to 3,245.65 after government data Wednesday showed the Chinese economy is recovering more slowly than expected following the lifting of anti-virus controls.
China's banks don't face the same pressures as foreign lenders because Beijing has held its benchmark lending rate steady since mid-2022 and keeps the country sealed off from global capital flows. State-owned Industrial & Commercial Bank of China, Ltd. and Bank of China, Ltd. were up 0.1%.
The Kospi in Seoul was 0.2% lower at 2,375.69 and Sydney's S&P-ASX 200 sank 1.4% to 6,969.30.
On Wall Street, the S&P 500 declined to 3,891.93. The Dow Jones Industrial Average lost 0.9% to 31,874.57 after being off more than 2% at one point. The Nasdaq composite recovered from a steep decline to close up 0.1% at 11,434.05.
Markets recovered some of their losses Wednesday after Switzerland's central bank said it could provide some assistance to Credit Suisse “if needed.”
On Thursday, Credit Suisse said it will borrow up to $54 billion from the central bank.
Credit Suisse has been fighting troubles for years, including losses from the 2021 collapse of investment firm Archegos Capital.
Its share price plunge reignited worries about the global industry after Silicon Valley Bank and Signature Bank collapsed in the second- and third-biggest U.S. bank failures in history.
On Wall Street, bank stocks plunged Monday, recovered Tuesday and tumbled again Wednesday.
First Republic Bank sank 21.4%, a day after soaring 27%. JPMorgan Chase slid 4.7%.
Banks are struggling after the Federal Reserve's fastest series of rate hikes in decades caused prices of assets on their balance sheets to decline.
In his annual letter to investors, BlackRock CEO Larry Fink pointed to prior eras of rising rates that led to “spectacular financial flameouts,” such as the savings and loan crisis of the 1980s.
“We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the U.S. regional banking sector (akin to the S&L Crisis) with more seizures and shutdowns coming,” he wrote.
Stress in the financial system could push the Fed to hold off on hiking rates at its meeting next week or at least refrain from the larger rate hike it had been potentially signaling. But inflation at 6% in February still is well above the Fed's 2% target.
Weaker-than-expected economic reports released Wednesday may have allayed some of those worries.
One showed that inflation at the wholesale level slowed by much more last month than economists expected. It’s still high at a 4.6% level versus a year earlier, but that was better than the 5.4% that was forecast.
Other data showed that U.S. spending at retailers fell by more than expected last month. Such data could raise worries about a recession on the horizon, but they may also take some pressure off inflation in the near term.
The yield on the two-year Treasury bond, or the difference between its market price and the payout at maturity, narrowed by an unusually wide margin to 3.89% from Tuesday's 4.25% as prices rose.
In energy markets, benchmark U.S. crude gained 84 cents to $68.45 per barrel in electronic trading on the New York Mercantile Exchange. The contract plummeted $3.72 on Wednesday to $67.61. Brent crude, the price basis for international oil trading advanced 96 cents to $74.65 per barrel in London. It lost $3.76 to $73.69 the previous session.
The dollar declined to 132.95 yen from Wednesday's 133.46 yen. The euro gained to $1.0610 from $1.0586.
