A Slump in Asian Stock Market Due to Bank Fears

Asian stocks were mostly lower on Thursday, mirroring a decline in Wall Street as concerns over the US banking sector and inflationary pressures exerted on investor sentiment.

Asian Stock Analysis

• Japan’s benchmark index, the Nikkei 225, declined by 0.2% to 28,349 in the morning trade.
• Australia’s S&P/ASX 200 declined by 0.4% to 7,288.70.
• South Korea’s Kospi increased by nearly 0.1% to 2,486.90.
• Hong Kong’s Hang Seng declined by 0.1% to 19,730.31, while,
• The Shanghai Composite increased by 0.3% to 3,274.59.
• S&P declined by 0.4% to 4,055.99
• Dow Jones Industrial Average declined by 0.7% to 33,301.87
• Nasdaq Composite increased by 0.5% to 11,854.35.

“Asian stocks declined on Thursday due to major turmoil in the banking sector,” said Anderson Alves of ActivTrades in a market commentary.

Wall Street was recovering from its worst day in a month, plagued by fears over the strength of US banks. First republic bank hit the hardest after losing another $29.8 billion the previous day, nearly half of it. At the time, it cited the number of customers who have fled over the past month amid the industry turmoil.

The concern is that it and other small and medium-sized banks could suffer a devastating run of customer deposits similar to those seen in the collapses of Silicon Valley Bank and Signature Bank last month. Even without more closures, the sector’s woes could cause banks to pull back on loans, weakening the economy.

Meanwhile, Activision Blizzard declined 11.4% after UK regulators blocked Microsoft’s acquisition over concerns that it would hurt controversy in the cloud gaming market.

Big Tech Flourishes

While most stocks declined, gains from Microsoft and other big tech companies prevented the market from falling further.

Technology stocks have been among the best this year as they laid off employees and made other cost-cutting efforts to improve profitability. Hopes that the US Federal Reserve would hold back on the wave of rate hikes helped.

Fed Interest Rate

All banks are struggling with significantly higher interest rates, which have increased over the past year to squeeze the screws on the financial and economic markets.

The Federal Reserve’s main daily interest rate is at its biggest since 2007. High-interest rates slow the overall economy and hurt asset prices.

In addition to the breach in the banking system, high-interest rates have slowed construction, manufacturing, and other sectors.