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Asian shares hesistant on banking jitters, US economic concerns


Passersby walk past an electric stock quotation board outside a brokerage in Tokyo, Japan, December 30, 2022. REUTERS/Issei Kato

Asian shares were subdued on Thursday as troubles at U.S. lender First Republic Bank (FRC.N) continued to unnerve investors amid concerns that growth in the world’s biggest economy could surprise on the downside.

The caution is set to extend to Europe, with pan-region Euro Stoxx 50 futures sliding 0.3%. Nasdaq futures , however, gained 0.6% as Facebook owner Meta (META.O) soared 12% after the bell with its earnings beat, and S&P 500 futures rose 0.3%.

Intel (INTC.O) and Amazon (AMZN.O) will report their results later on Thursday.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) skidded 0.2%, while Japan’s Nikkei (.N225) trimmed earlier losses to be 0.1% lower.

Singapore’s Straits Times Index (.STI) fell 0.5%, dragged lower by real estate companies after the government raised taxes on private property purchases.

China and Hong Kong stocks oscillated between losses and gains, as investors weighed still steep declines in China’s industrial profits data and new developments on the geopolitical front.

Investors cheered the phone call between President Xi Jinping and his Ukrainian counterpart Volodymyr Zelenskiy, but were dishearted by U.S. saying that Chinese cloud computing firms pose a threat to U.S. security.

On Thursday, Nomura 8604.T shares fell more than 7% after posting a sharp fall in quarterly net profit as a global banking crisis roiled markets and hit its investment banking business.

Overnight, the woes of First Republic continued, with its market value briefly sinking as much as 41% to about $888 million, a far cry from its peak of more than $40 billion in November 2021.

Investors are waiting to see whether it can find buyers for assets and engineer a turnaround after CNBC reported that U.S. government officials are currently unwilling to intervene.

“First Republic is a bank it would seem to soon be no more. As the bank attempts all manner of rescue strategies it continues to slide relentlessly,” said Clifford Bennett, chief economist at ACY Securities.

“It is a case of the incredible shrinking bank. Until, in the end, it likely just simply ceases to exist.”

Overnight, the S&P 500 (.SPX) and the Dow (.DJI) were pulled lower by weakness in economically sensitive sectors, hinting at mounting recession jitters.

The Atlanta Federal Reserve’s GDPNow, which tracks how incoming data influences estimated gross domestic product (GDP), showed that the estimate for the first-quarter growth is now at an annualised 1.1%, sharply down from 2.5% just a week ago.

That suggests there may be a downside risk to U.S. first-quarter GDP data, due later on Thursday, with analysts polled by Reuters tipping an expansion of 2%. Wells Fargo lowered its forecast for U.S. GDP growth by 100 basis points to a 0.8% rise.

Fed funds futures are pricing in a chance of about 75% that the Federal Reserve will hike interest rates by 25 basis points (bps) at its May meeting next week.

In the currency markets, the euro edged 0.1% higher to $1.1054, moving closer to its highest level in over a year of $1.1095 hit just a day ago. It has benefited from bets that the economic outlook for Europe could be on the upside after Germany raised its economic forecast for growth this year.

The dollar index , which measures the currency against six major rivals, eased 0.1% to 101.3, on top of a 0.4% decline overnight, due to fresh concerns over a U.S. slowdown.

U.S. Treasuries yields mover slightly higher, with the two-years up 3 basis points to 3.953%, and ten-years up 2 bps to 3.4504%. One-month Treasury yields tumbled ahead of a possible Washington vote on the U.S. debt ceiling.

Oil recovered some ground on Thursday after tumbling almost 4% on recession fears. U.S. crude futures edged up 0.1% to $74.4 per barrel, while Brent crude futures rose 0.3% to $77.90 per barrel.

Gold gained 0.5% to $1,990.04 per ounce.

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