Asian shares slipped at the open Friday after risk sentiment dimmed on Wall Street as bad loans at two US banks heightened concerns about the credit market. US stock futures indicated further weakness.
Shares in Japan, Australia and South Korea all retreated at the open, echoing a lackluster mood in New York trading. Equity futures for US gauges also slipped after the S&P 500 fell 0.6%, weighed down by a 2.8% drop for its financial stocks, while the Nasdaq 100 ended 0.4% lower.
Gold and silver touched all-time highs as fears about credit quality in the US economy and heightened US-China frictions strengthened demand. Treasury yields extended their losses with the two-year yield falling to the lowest level since 2022 and the 10-year yield below 4%. An index of the dollar declined, with the gauge set for its worst week since late July.
Shares of US regional lenders tumbled after fallout from the collapse of subprime auto lender Tricolor Holdings spread beyond Wall Street. Zions Bancorp fell 13% after a $50 million charge-off tied to a California Bank & Trust loan, while Western Alliance Bancorp dropped 11% after revealing exposure to the same borrowers.
The moves highlighted growing concerns about the US credit market, serving as the clearest evidence of the nervous undercurrents recently plaguing Wall Street as stocks rally to record high levels. That’s adding to a list of worries facing investors, which includes the government shutdown, fears of an AI bubble and renewed trade tensions between the US and China.
The latest disclosures “seem isolated to those two relatively sizeable regional banks,” said Steve Sosnick at Interactive Brokers. He cautioned against interpreting the developments as “systemic”, for now.
Meanwhile, Bank of Japan Governor Kazuo Ueda indicated that the bank will continue tightening if confidence in achieving its economic outlook strengthens — keeping the door open for a near-term interest-rate hike.
The yen was stronger against the dollar in early Friday trading, extending its run of three consecutive sessions of gains.
In trade news, the White House is poised to ease tariffs on the US auto industry, a move that would deliver a major win for carmakers that have aggressively lobbied to stem the fallout from record-level import duties.
Elsewhere, Federal Reserve Governor Christopher Waller said officials can keep lowering rates in quarter-percentage-point increments to support a faltering labor market, while Stephen Miran continued to advocate a larger reduction.
September inflation data that was slated to have been released this week was postponed because of the US government shutdown.
That has complicated assessing the urgency of additional rate cuts, however Fed officials broadly have continued to back their September assessment that two more quarter-point cuts were likely this year.
“With the government shutdown limiting the amount of economic data available to investors, they’ll have to rely on earnings to drive the near-term narrative,” said Bret Kenwell at eToro. “At this point, earnings have the potential to steady the ship or rock the boat when it comes to recent volatility — and bulls are hoping for the former rather than the latter.”
Traders also kept a close eye on geopolitics. President Donald Trump and his Russian counterpart Vladimir Putin agreed to meet in Budapest during a two-hour phone call. The conversation took place a day before Trump’s White House meeting with Ukrainian President Volodymyr Zelenskiy.
Oil fell to a fresh five-month low after Trump said he’ll meet with Putin to discuss ending the war in Ukraine, raising expectations that Russian crude may soon flow freely.
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