With the labour market still tight, investors are keeping a wary eye on US jobs data with a strong reading likely putting pressure on the Federal Reserve to hike interest rates further
New York (AFP) - US banking shares plunged Thursday, weighing on the broader stock market after a mixed session on global bourses.
The worries about the financial sector come ahead of key American jobs data, and as investors were already on guard following hawkish commentary this week from Federal Reserve Chair Jerome Powell.
SVB Financial Group, a Silicon Valley-focused financial company, disclosed Wednesday that it lost $1.8 billion following securities sales to raise funds, as it contends with declining customer deposits.
The news came on top of an announcement the same day that crypto banking titan Silvergate plans to shut down in the face of cryptocurrency market turmoil.
The market movements are a “flight to safety” amid worries about the financial sector, said Art Hogan, an analyst at B. Riley Financial.
“It feels as though there’s some cracks in the regional banks,” Hogan added.
Major US stock indices finished about two percent lower following an ugly day for financial companies.
“The added angst in today’s price action was the understanding that something typically ‘breaks’ when the Fed is in an aggressive tightening cycle,” said Briefing.com.
In Europe, Frankfurt ended the day flat and Paris dipped 0.1 percent.
But London stocks dropped 0.6 percent as the pound rose and a number of stocks stopped trading with dividends.
Asian stocks closed mostly lower.
Markets are looking ahead to Friday’s keenly-anticipated government jobs data for February. Analysts expect the US economy added 205,000 jobs last month and that unemployment held steady at 3.4 percent.
Investors fear a strong reading in Friday’s report could prompt the Fed to boost rates by a larger amount at its meeting this month and continue doing so, possibly pushing the economy into recession.
Jobless claims rose more than anticipated according to the Labor Department on Thursday.
“The back-and-forth week continues, as signs of some weakness in US employment data prompted hopes that perhaps Powell’s hawkishness earlier in the week was misplaced,” said Chris Beauchamp, chief market analyst at online trading platform IG.
Friday also sees a key meeting of the Bank of Japan.
The “BoJ will meet for the last time under Governor Haruhiko Kuroda amid increasing speculation of a ‘legacy’ change to policy,” said Stephen Innes of SPI Asset Management.
Kuroda, the central bank’s longest-serving leader, became governor in 2013 and his attempts to boost Japan’s moribund economy have ranged from a negative interest rate to spending vast sums on government bonds.
In the past year, he has held firm even as other central banks hiked rates to tackle inflation, with the resulting policy gap causing the yen to slump against the dollar.
- Key figures around 2220 GMT -
New York - Dow: DOWN 1.7 percent at 32,254.86 (close)
New York - S&P 500: DOWN 1.9 percent at 3,918.32 (close)
New York - Nasdaq: DOWN 2.1 percent at 11,338,35 (close)
London - FTSE 100: DOWN 0.6 percent at 7,879.98 (close)
Frankfurt - DAX: FLAT at 15,633.21 (close)
Paris - CAC 40: DOWN 0.1 percent at 7,315.88 (close)
EURO STOXX 50: DOWN less than 0.1 percent at 4,286.12 (close)
Tokyo - Nikkei 225: UP 0.6 percent at 28,623.15 (close)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 19,925.74 (close)
Shanghai - Composite: DOWN 0.2 percent at 3,276.09 (close)
Euro/dollar: UP at $1.0586 from $1.0545 on Wednesday
Pound/dollar: UP at $1.1922 from $1.1845
Euro/pound: DOWN at 88.77 pence from 89.04 pence
Dollar/yen: DOWN at 136.15 yen from 137.36 yen
Brent North Sea crude: DOWN 1.3 percent at $81.59 per barrel
West Texas Intermediate: DOWN 1.2 percent at $75.72 per barrel