Equity markets were mixed on Friday as concerns over the health of the global banking system dragged down shares in US lenders down more than 14 per cent this week.
The FTSE All-World stock index was down 0.1 per cent on Friday during Asian trading but up 1.6 per cent for the week. Technology stocks in Asia initially followed the Nasdaq Composite higher on hopes that the US Federal Reserve’s monetary tightening cycle may be nearing an end.
Hong Kong’s Hang Seng Tech index rose as much as 2.3 per cent on Friday before paring gains to be up just 0.1 per cent. Other benchmarks in the region nursed minor losses, including a drop of 0.3 per cent for China’s CSI 300. The gains for tech shares in Asia followed a 1 per cent rise for the Nasdaq Composite index on Thursday.
Futures tipped the FTSE 100 stock index to shed 0.6 per cent at the open in London, while the S&P 500 was set to rise 0.2 per cent.
The broader S&P 500 eked out a gain of just 0.3 per cent, with financial stocks struggling to recover following the collapse of Silicon Valley Bank in the US and rescue of Swiss lender Credit Suisse by rival UBS.
The KBW Nasdaq Bank index finished Thursday’s session down 1.7 per cent, even after comments from US Treasury secretary Janet Yellen that regulators were “prepared to take additional actions if warranted” to ensure the safety of bank deposits. The US banking index has shed almost 30 per cent over the last two weeks.
On Wednesday, the US Federal Reserve proceeded with a 0.25 percentage point interest rate increase. On Thursday, the Bank of England also raised its benchmark rate by 0.25 percentage points.
Citigroup strategist Dirk Willer said it was “too early to tell” whether banking sector stress had grown large enough to meaningfully impact the US business cycle. But he added that in light of heightened uncertainty, the Fed had “become more cautious, as did the ECB”.
“We remain negative on risky assets given the banking stress tightens credit and reaffirms Citi’s call for a US recession in [the second half] of 2023,” Willer said.
In currency markets, the dollar index — which tracks the greenback’s value against a basket of other currencies — was down 0.1 per cent, while yields on 10-year US Treasuries fell 0.04 percentage points to 3.385 per cent.