Asian shares slipped after risk sentiment dimmed on Wall Street as bad loans at two US banks heightened concerns about the credit market.
MSCI’s regional stock gauge dropped 0.2% with financials the biggest drag. US equity-index futures indicated further weakness after the S&P 500 fell 0.6%, weighed down by a drop for its financial stocks. 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, after stocks rallied to record high levels. That’s adding to a list of worries facing investors, including the US government shutdown, fears of an AI bubble and renewed trade tensions between the US and China.
“It will be creating some cautious pullback, taking risk off the table,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank. “Investors in Asia may be cautious of exposures or liabilities on the books in Asia that may get hurt.”