Asian stocks climbed, the dollar weakened, and gold lingered near record highs on Friday, as investors remained anxious about the U.S. banking sector in the wake of another sell-off in regional lender shares.
Japan (.MIAPJ0000PUS) was up 0.44 percent and poised to end a two-week losing streak. Japan remains closed for the holiday, while the Australian S&P/ASX 200 index (.AXJO) declined by 0.06%.
PacWest Bancorp’s (PACW.O) decision to explore strategic alternatives heightened concerns about the health of U.S. lenders as pressure mounts on regulators to take additional measures to bolster the nation’s banking sector.
MSCI’s widest Asia-Pacific stock index outside the region.
In the aftermath of the weekend failure of First Republic Bank, which has reignited concerns of a financial sector crisis, regional bank stocks in the United States fell this week.
“With the dust barely settling from Wednesday’s Fed meeting, banking sector developments have bolstered the belief that not only is the Fed done tightening, but that it will cut rates aggressively before the end of the year,” said Ray Attrill, head of FX strategy at National Australia Bank.
Wednesday, the Federal Reserve raised interest rates by 25 basis points, but indicated that its protracted rate hike cycle may be coming to an end.
According to the CME FedWatch instrument, the markets anticipate the Fed to leave rates unchanged at its next meeting in June, but to begin cutting rates in July.
Later in the day, investors will focus on April nonfarm payroll data. The report will be used by Saxo Markets strategists to gauge the Fed’s next move, whether that is a pause or “further policy tightening.”
“It is important to note that there is a wealth of information between now and the Fed’s meeting on June 14,” they said. “However, the banking sector is currently more important.”
Thursday, the European Central Bank raised interest rates by 25 basis points to 3.25 percent and signaled that additional tightening would be required to combat inflation.
Having raised rates by the greatest amount in its 25-year history, the ECB, the central bank for the 20 countries that share the euro currency, is moderating the tempo of monetary policy tightening in light of data indicating the euro zone economy is scarcely growing and banks are closing credit taps.
However, markets reduced their forecasts for how much further rates would continue to rise.
Nick Rees, FX market analyst at Monex Europe, stated that despite ECB President Christine Lagarde’s efforts to divert markets away from this narrative, it is evident that the ECB is in the final stages of monetary tightening.
China shares (.SSEC) were up 0.21%, and Hong Kong’s Hang Seng index (.HSI) was up 0.6%, contributing to the region’s stock market gain.
China’s service activity expanded for a fourth consecutive month in April, according to a private survey released on Friday, as businesses continued to benefit from the country’s reopening despite a minor slowdown.
During the five-day May Day holiday period, domestic travel increased by more than two-thirds compared to the same period last year, according to government data.
S&P 500 E-mini futures increased 0.35 percent after Apple’s announcement.
Inc’s (AAPL.O) results exceeded expectations, aided by stronger-than-anticipated iPhone sales and notable market penetration in India and other emerging markets.
Due to safe-haven demand, the Japanese yen strengthened 0.20 percent to 134.04 per dollar on the currency market, putting it on track for its first weekly gain in nearly a month. /FRX
The last price for sterling was $1.2591, up 0.15% on the day, while the euro strengthened to $1.1034 (up 0.21%).
The dollar declined 0.109% versus a basket of currencies.
The spot price of gold was $2,051.48 per ounce, which was close to its all-time high of $2,072.49.
U.S. crude increased 0.47 percent to $68.88 per barrel, while Brent rose 0.47 percent to $72.82 per barrel.