Asian shares experienced a decline on Friday, largely due to a retreat in Wall Street caused by escalating concerns regarding the loan portfolios of banks. U.S. futures and oil prices also experienced a downturn, while the price of gold rose to over $4,383 an ounce amid escalating trade tensions between Washington and Beijing.
In Japan, the Nikkei 225 index fell by 1.3%, closing at 47,646.31, following the trend set by U.S. losses. Investor sentiment has been affected by uncertainty surrounding the choice of a new prime minister. Conservative lawmaker Sanae Takaichi was recently elected to lead the ruling Liberal Democratic Party. However, the collapse of its coalition with the Buddhist-backed Komeito has cast doubts on her ability to secure enough support from the lower house of parliament ahead of an anticipated vote next week. Takaichi has been actively working on forming a new alliance with the Osaka-based Japan Innovation Party, which would enhance her chances of becoming Japan's first female prime minister.
Chinese markets mirrored this sentiment, as shares fell in response to heightened trade tensions with the U.S. The Hang Seng index in Hong Kong plummeted 1.6% to 25,473.09, while the Shanghai Composite index fell by 1%, closing at 3,877.20. Traders are adopting a cautious approach in anticipation of significant economic data scheduled for release on Monday, along with an important meeting of the ruling Communist Party leadership that will take place next week.
The South Korean market saw a slight boost, with the Kospi index gaining 0.2% to 3,754.28, driven by optimism surrounding advancements in trade discussions with the U.S. Additionally, data released indicated that South Korea's seasonally adjusted unemployment rate fell to 2.5% in September, down from 2.6% in August.
In Australia, the S&P/ASX 200 index took a hit, losing 0.8% to close at 8,993.80, retreating from the previous day’s record high, with energy and technology stocks leading the decline. Taiwan's Taiex dropped by 0.9%, whereas in India, the Sensex posted a modest gain of less than 0.2%.
On Wall Street, stocks were down on Thursday, amid fresh worries regarding the financial stability of midsized banks. The S&P 500 index declined by 0.6%, closing at 6,629.07, while the Dow Jones Industrial Average fell by 0.7% to finish at 45,952.24. The Nasdaq composite also lost 0.5%, ending at 22,562.54.
In a significant development, Zions Bancorp, based in Salt Lake City, saw its stock tumble by 13.1% after disclosing that its third-quarter profit would suffer due to a $50 million charge-off related to loans made to two borrowers. The bank reported encountering "apparent misrepresentations and contractual defaults" by the borrowers and several guarantors, alongside "other irregularities." Additionally, Western Alliance Bancorp's stock dropped by 10.8% following a lawsuit against a borrower, alleging fraud, although it maintained its financial forecasts for 2025.
This renewed scrutiny surrounding the quality of loans issued by banks has been prompted by last month’s Chapter 11 bankruptcy filing by First Brands Group, a supplier of aftermarket auto parts. Market analysts are now questioning whether these issues are isolated incidents or indicative of a more significant threat to the financial sector.
Stephen Innes of SPI Asset Management commented on the situation, stating, "The Street's been dining on rate cut and AI optimism for months, but this week the waiter brought something no one ordered: the return of the credit bogeyman." He further remarked that regional banks have become “the canaries in the credit coal mine,” with the current signals appearing weak.
Broadly speaking, U.S. companies are under increasing pressure to deliver stronger profit results, particularly after the S&P 500 surged by 35% from its low in April. To sustain these valuations, which critics argue have led to inflated stock prices, companies must demonstrate substantial profit growth moving forward.
In other developments on Friday, benchmark crude oil prices diminished by 10 cents to $56.89 per barrel, while Brent crude, the international standard, lost 9 cents to settle at $60.97 per barrel. The U.S. dollar fell to 150.10 Japanese yen from 150.44 yen, while the euro advanced to $1.1707 from $1.1688.
