Asian equities fell sharply on Friday, tracking Wall Street’s steep overnight losses as renewed signs of stress among U.S. regional banks unsettled investors across global markets.
Fears of another credit crunch sent investors scrambling for safety, driving gold prices to record highs and bond yields to multi-year lows, while the U.S. dollar weakened broadly against the yen and Swiss franc.
Zions Bancorporation plunged 13% after reporting a $50 million loss linked to two California loans, while Western Alliance dropped 11% amid a fraud-related lawsuit. The developments reignited fears of a new wave of U.S. banking instability, reminiscent of the turmoil that hit the sector in 2023.
“Asian traders are hyper-alert to banking stress in the U.S.,” said Tony Sycamore, market analyst at IG Markets. “The region’s exporters and tech giants remain exposed to U.S. credit conditions, so risk sentiment turns defensive quickly.”
Markets Across Asia Tumble
The MSCI Asia-Pacific ex-Japan index dropped 0.9% for the day, with all major regional markets in the red.
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Japan’s Nikkei 225 fell 1%, led by declines in banking and industrial stocks.
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China’s CSI 300 and Hong Kong’s Hang Seng both dropped 1.4%, reflecting investor caution over global growth and renewed U.S.-China trade tensions.
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Taiwan’s TSMC slipped 0.9% despite reporting record quarterly profits and stronger AI-related demand.
“Even positive earnings in Asia can’t offset macroeconomic jitters,” said Rico Luman, economist at ING. “Investors are pricing in slower U.S. demand and more cautious monetary policy worldwide.”
Safe-Haven Rush: Gold and Yen Surge
Investors piled into safe-haven assets. Gold hit a record $4,378 per ounce, its strongest weekly performance since early 2020, gaining nearly 7.6% in a week. Silver also climbed to new peaks.
In foreign exchange markets, the yen rose 0.7% and the Swiss franc 0.9% for the week, as the U.S. dollar index fell to 98.24, its lowest in ten days.
The two-year Treasury yield hit a three-year trough of 3.404%, as traders priced in two additional rate cuts from the Federal Reserve by year-end.
“The yen and gold are moving in lockstep as investors search for stability,” said Naoko Sera, FX strategist at Nomura. “Market anxiety over U.S. banks is echoing through Asian currency markets.”
Geopolitical and Policy Overhang
Sentiment was further dampened by escalating U.S.-China trade friction. Beijing accused Washington of “stoking panic” over China’s rare earth export restrictions after the White House urged a rollback. The tensions added pressure on Asian equities already weighed down by slower manufacturing and global demand.
Meanwhile, Bank of Japan Governor Kazuo Ueda said the central bank would carefully assess data before adjusting interest rates, reinforcing expectations that Japan will maintain ultra-loose policy for now. Political uncertainty also lingered as LDP leader Sanae Takaichi sought backing for next week’s leadership vote.
Global Outlook: Investors Brace for Volatility
European and U.S. futures signaled continued weakness, with Euro Stoxx 50 futures down 0.7% and FTSE futures sliding 0.9%.
Market analysts warned that persistent credit concerns, coupled with trade tension and political shifts in Japan, could weigh on Asian markets heading into next week.
“Asia remains vulnerable to global shocks,” said Priya Misra of TD Securities. “The Fed’s path and U.S. financial health will dictate sentiment across the region in the near term.”
