Monday, 27 May 2024

Asian shares mixed after Wall Street logs more gains

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Asian shares were mixed on Monday after stocks on Wall Street shook off a weak start to end higher on Wall Street last week despite persisting worries over banks on both sides of the Atlantic, AP reported.

U.S. futures and oil prices were higher after the Federal Deposit Insurance Corp. said it agreed to the sale of troubled Silicon Valley Bank to North Carolina-based First-Citizens Bank & Trust Co. The FDIC took over Silicon Valley Bank after it collapsed on March 10, promising to protect all depositors.

The acquisition could raise confidence in the troubled banking industry after failures at SVB and two other banks rattled investors, driving lenders’ share prices sharply lower. But concerns persist that higher interest rates that are squeezing lenders could increase the likelihood of a recession. The troubles in the banking industry also have added to uncertainty about policies of the Federal Reserve and other central banks.

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“This is keeping financial stocks pressured with traders on the lookout for any other potential pockets of trouble in the global financial system,” Tim Waterer, an analyst at Kohle Capital Markets, said in a commentary. Given recent market gains, “it’s fair to say that traders are putting on a brave face despite no assurances that we have seen the last of the banking sector woes,” he said.

The managing director of the International Monetary Fund, Kristalina Georgieva, told a conference in Beijing on Sunday that risks to financial stability have risen as interest rates are raised to fight inflation. She said actions by central banks and other regulators have helped to ease strains on markets, “but uncertainty is high, which underscores the need for vigilance.”

Chinese markets declined Monday after the government reported that industrial profits fell nearly 23% in the first two months of the year from a year earlier.

Hong Kong’s Hang Seng skidded 1.3% to 19,667.66 and the Shanghai Composite index lost 0.4% to 3,251.40.

Tokyo’s Nikkei 225 added 0.3% to 27,476.87 and the Kospi in Seoul shed 0.2% to 2,409.22. Australia’s S&P/ASX 200 edged 0.1% higher, to 6,962.00 and the Sensex in Mumbai gained 0.6%. Shares edged higher in Bangkok.

On Friday, the S&P 500 rose 0.6%, marking its second straight weekly gain, to close at 3,970.99. The Dow Jones Industrial Average added 0.4% to 32,237.53 and the Nasdaq composite climbed 0.3% to 11,823.96. The Russell 2000 index rose 0.9% to 1,734.92.

Investors are focused on what the Federal Reserve and other central banks will do with interest rates going forward after the recent spate of turmoil in the banking sector.

Deutsche Bank ‘s stock tumbled 8.5% in Germany on Friday and shares of other major European banks suffered smaller declines. Earlier this month, shares of and faith in Swiss bank Credit Suisse, which has its own unique set of troubles, fell so much that regulators brokered a takeover of it by rival UBS.

The failures of Silicon Valley Bank and at New York-based Signature Bank have cast a harsh spotlight across the entire industry. Investors have zeroed in on smaller and midsized banks, the ones below in size of the “too-big-to-fail” banks and seen as riskier.

Pressure on lenders could hinder lending to small and midsized businesses across the country. That in turn could lead to less hiring, a weaker economy and a higher potential for a recession that many economists already saw as likely.

Friday’s reports on the economy came in mixed, with orders for long-lasting manufactured goods slower last month than economists expected while business activity showed the fastest uptick in almost a year, according to a preliminary report from S&P Global.

In other trading, U.S. benchmark crude oil advanced 80 cents to $70.06 per barrel in electronic trading on the New York Mercantile Exchange. It lost 70 cents to $69.26 on Friday.

Brent crude, the pricing basis for international trading, gained 82 cents to $75.41 per barrel in London.

The U.S. dollar rose to 131.18 Japanese yen from 130.57 yen. The euro weakened to $1.0761 from $1.0774.

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