US banking sector concerns ripple through Asia while BOJ decision impacts yen and JGB yields
GLOBAL MARKETS: US Bank Woes Unnerve Investors, Asia Stocks Bear Brunt
Friday saw Asian markets plummet as concerns arose over a Silicon Valley start-up that had to raise capital after suffering high cash burn and raising capital costs. This news came as a surprise to many who had thought the regional economies were recovering, and it caused bank stocks to drop. Onheavily affected blankly is JP Morgan Chase, whose stock dropped by over 5%. The yen also dropped, and the Japanese bond yield plunged.
European and American equity markets also saw a dip in value when they reopened after the news in Asia, suggesting that the effects of the event will be far-reaching.
SVB Financial Group, the start-up lender at the center of this issue, suffered a 70% dip in value due to its announcement. The company also noted a higher-than-expected “cash burn” from clients and falling deposits which led investors to believe that broader banking system stress is forthcoming.
The Federal Reserve, on the other hand, may see reduced expectations for a US interest rate rise due to the SVB announcement. This caused the Fed funds futures to rally strongly, and the market-implied peak in US rates was also reduced.
• Australian, Hong Kong, and Asian bank stocks were affected the most by the Silicon Valley start-up’s issues.
• SVB Financial Group had to raise capital after falling deposits and rising costs.
• The yen weakened, and Japanese government bond yields slid when the Bank of Japan kept the stimulus settings steady.
• The global markets are vulnerable, and news from any start-up can cause turmoil in the market.
• US banks are highly influential around the world. So when a bank in the US experiences stresses, it affects bank stocks in other parts of the world.
• The Federal Reserve will have to carefully decide about interest rates as the expectation for the rate rise decreases.
The financial market is fickle, and investors must be vigilant to protect their investments. With the bank stocks plummeting on Friday, the news of the SVB Financial Group came as a surprise and might create further trouble because it has caused wide speculation of a broader banking-system stress. As a result, it is important to continue to monitor the market to see how it reacts to the news concerning SVB Financial Group.