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  • Asian stocks sink after Credit Suisse takeover

    Asian stocks sink after Credit Suisse takeover

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    BEIJING — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

    Hong Kong, Tokyo and Sydney declined. Shanghai edged up. Oil prices retreated.

    Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

    Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

    “Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

    The Hang Seng in Hong Kong lost 2.5% to 19,023.69 and the Nikkei 225 in Tokyo shed 1.1% to 27,030.90. The Shanghai Composite Index gained 0.1% to 3,254.81.

    The Kospi in Seoul retreated 0.4% to 2,387.06 and Sydney’s S&P-ASX 200 lost 1.2% to 6,913.80. New Zealand and Southeast Asian markets also declined.

    The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

    U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

    Separately, New York Community Bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    That fueled concern about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index lost 1.1% on Friday to 3,916.64.

    Shares of First Republic Bank sank nearly 33% to bring their plunge for the week to 71.8%.

    The Dow Jones Industrial Average lost 1.2% to 31,861.98. The Nasdaq composite fell 0.7% to 11,630.51.

    The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

    Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

    A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In energy markets, benchmark U.S. crude sank 41 cents to $66.33 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74.

    Brent crude, the price basis for international oils, declined 44 cents to $72.53 per barrel in London. It retreated $1.73 the previous session to $72.97.

    The dollar gained to 132.03 yen from Friday’s 131.67 yen. The euro declined to $1.0667 from $1.0681.

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  • Asian stocks sink after Credit Suisse takeover

    Asian stocks sink after Credit Suisse takeover

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    BEIJING — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

    Hong Kong, Tokyo and Sydney declined. Shanghai edged up. Oil prices retreated.

    Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

    Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

    “Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

    The Hang Seng in Hong Kong lost 2.5% to 19,023.69 and the Nikkei 225 in Tokyo shed 1.1% to 27,030.90. The Shanghai Composite Index gained 0.1% to 3,254.81.

    The Kospi in Seoul retreated 0.4% to 2,387.06 and Sydney’s S&P-ASX 200 lost 1.2% to 6,913.80. New Zealand and Southeast Asian markets also declined.

    The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

    U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

    Separately, New York Community Bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    That fueled concern about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index lost 1.1% on Friday to 3,916.64.

    Shares of First Republic Bank sank nearly 33% to bring their plunge for the week to 71.8%.

    The Dow Jones Industrial Average lost 1.2% to 31,861.98. The Nasdaq composite fell 0.7% to 11,630.51.

    The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

    Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

    A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In energy markets, benchmark U.S. crude sank 41 cents to $66.33 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74.

    Brent crude, the price basis for international oils, declined 44 cents to $72.53 per barrel in London. It retreated $1.73 the previous session to $72.97.

    The dollar gained to 132.03 yen from Friday’s 131.67 yen. The euro declined to $1.0667 from $1.0681.

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  • Stocks fall to cap chaotic week driven by fears about banks

    Stocks fall to cap chaotic week driven by fears about banks

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    NEW YORK (AP) — Stocks fell Friday to end a whipsaw week on Wall Street amid rising fear among investors that turmoil in the banking industry could drag the economy into a recession.

    The S&P 500 sank 1.1%, cutting into its gain for the week. The Dow Jones Industrial Average lost 384 points, or 1.2%, while the Nasdaq composite fell 0.7%.

    Markets around the world churned this past week as worries rose following the second- and third-largest U.S. bank failures in history. On Thursday, markets rallied in relief after two banks in investors’ crosshairs bolstered their cash holdings.

    But on Friday, some of the hope washed out, and the pair went back to falling. In Switzerland, Credit Suisse shares dropped 8%. On Wall Street, shares of First Republic Bank sank nearly 33% to bring their plunge for the week to 71.8%.

    The two banks have different sets of issues challenging them, but the overriding fear is that the banking system may be cracking under the weight of the fastest set of hikes to interest rates in decades.

    “If the Fed hikes this far this fast, something will break,” said Ross Mayfield, investment strategy analyst at Baird. “There’s a very clear and evident history of that happening, even in slower, smaller rate-hike cycles.”

    Analysts have been quick to say the current chaos for banks looks nowhere near as bad as the 2007-08 financial crisis that ruined the global economy. But the troubles still feed into concerns about a recession because problems for banks could mean problems for smaller and mid-sized companies getting the loans they need to grow.

    In “the biggest picture: since 1870 there have been 14 big world recessions, all driven by wars, pandemics & banking crises,” investment strategist Michael Hartnett wrote in a BofA Global Research report.

    Banks borrowed nearly $165 billion from the Federal Reserve over the last week in a sign of how much stress is in the system.

    After years of enjoying historically easy conditions, banks are now getting a shock after the Federal Reserve and other central banks jacked up interest rates at a blistering pace. The moves are meant to get the world’s high inflation under control.

    Higher rates can indeed help tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank, which regulators seized a week ago.

    Since then, Wall Street has tried to root out banks with similar traits to Silicon Valley Bank, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    That’s why investors keyed in so much on San Francisco-based First Republic. A group of 11 of the biggest banks on Thursday said they would deposit a combined $30 billion in the bank to show their confidence in it and banks in general. After getting a brief respite Thursday, its stock fell again Friday with other smaller and mid-sized banks.

    “There’s still a lot of unknowns,” Baird’s Mayfield said about what types of investments banks have in their portfolios and how easily they can be turned into cash quickly. “That’s the biggest fear. That’s when markets are typically at their most volatile and most negative. And for most investors who have been in the business for a while, it’s hard not to call back to memory 2008, 2009 even if it does look quite different.”

    Some of the wildest action has been in the bond market, where yields have swung as traders drastically recalibrate bets for where the Fed will take rates.

    The yield on the two-year Treasury dropped to 3.81% from 4.17% late Thursday. It was above 5% last week and at its highest level since 2007. That’s a massive move for the bond market.

    Traders largely expect this week’s turmoil to push the Federal Reserve to hike interest rates at its next meeting by only a quarter of a percentage point. That would be the same sized increase as last month’s and half the hike of 0.50 points that some traders were earlier expecting.

    A report on Friday gave the Fed possibly more reason to hold off on reaccelerating its rate hikes. Expectations for inflation among U.S. consumers are falling, according to a preliminary survey by the University of Michigan. That’s key for the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In a more discouraging signal for the economy, confidence also fell. That’s at the heart of the most important part of the U.S. economy: consumer spending.

    Easing expectations for the Fed have helped several Big Tech stocks recently. They’ve had their own problems, but they tend to benefit from lower interest rates. Partly because of that, the S&P 500 still logged a gain of 1.4% for this past week.

    All told, the S&P 500 fell 43.64 points Friday to 3,916.64. The Dow fell 384.57 to 31,861.98, and the Nasdaq fell 86.76 to 11,630.51.

    Cryptocurrencies shot even higher. Bitcoin rose more than 30% this week.

    ___

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

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  • UBS to buy Credit Suisse for $3.2 billion to rein in turmoil

    UBS to buy Credit Suisse for $3.2 billion to rein in turmoil

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    GENEVA — Banking giant UBS is buying its smaller rival Credit Suisse for $3.2 billion in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced Sunday night.

    The deal was “one of great breadth for the stability of international finance,” Berset said. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

    The Swiss Federal Council, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without the approval of shareholders.

    Credit Suisse Chairman Axel Lehmann called the deal “a clear turning point.”

    “It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland.

    Colm Kelleher, the UBS chairman, hailed the “enormous opportunities” that emerge from the takeover, and highlighted his bank’s “conservative risk culture” — a subtle swipe at a Credit Suisse culture that’s known for more swashbuckling, aggressive gambles on bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

    Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”

    The combination of the two biggest and best-known Swiss banks, each with storied histories dating to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking.

    The deal follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week.

    European Central Bank President Christine Lagarde lauded the “swift action” by Swiss officials, saying they were “instrumental for restoring orderly market conditions and ensuring financial stability.”

    She said the banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation.

    While UBS is buying Credit Suisse, UBS officials said they plan to sell off parts of it or reduce the size of the bank in the coming months and years.

    The Swiss central bank agreed to loan Credit Suisse up to 50 billion francs ($54 billion) on Thursday, temporarily boosting its shares, but that was not enough to halt the market swings and stem a loss of deposits, according to news reports.

    “We noted that the outflows of liquidity and the volatility of the markets demonstrated that necessary confidence could no longer be restored, and a rapid solution guaranteeing stability was essential,” Berset said.

    On Sunday, the Swiss central bank said it would provide a loan of 100 billion Swiss francs ($108 billion) backed by a federal default guarantee to support the deal, which is expected to be completed by the end of the year.

    A part of the deal, approximately 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. But these bonds are designed to be wiped out if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal.

    Berset said the Federal Council had already been discussing a long-troubled situation at Credit Suisse since the beginning of the year and held urgent meetings in the last four days amid spiraling concerns about its financial health that caused major swoons in its stock price and raised the specter of the 2007-08 financial crisis.

    Investors and banking industry analysts we`re still digesting the deal, but one analyst was sour on the news due to the reputational damage the deal might have on Switzerland’s global banking image.

    “A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” said Octavio Marenzi, CEO of consulting firm Opimas LLC, in an email.

    Marenzi added he expected Switzerland’s direct democracy governmental model is likely to result in court and ballot challenges for this deal, potential leading to more chaos.

    Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.

    The Credit Suisse parent bank is not part of European Union supervision, but it has entities in several European countries that are. Lagarde reiterated what she said last week after the central bank raised interest rates — that the European banking sector is resilient, with strong financial reserves and plenty of ready cash.

    Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corp. and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

    The deal caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.

    On Friday, shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.

    Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that Credit Suisse would be the next domino to fall.

    While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.

    The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.

    ___

    Associated Press Writers Frank Jordans and Emily Schultheis in Berlin, Barbara Ortutay in Oakland, Calif., and Chris Rugaber in Washington contributed.

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  • How major US stock indexes fared Friday 3/17/2023

    How major US stock indexes fared Friday 3/17/2023

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    Wall Street’s week of turmoil closed with drops for stocks

    Wall Street’s week of turmoil closed with drops for stocks.

    The S&P 500 fell 1.1% Friday, led by drops in First Republic and other banks. The Dow Jones Industrial Average and Nasdaq composite also pulled back.

    This week has been a whipsaw for global markets as concerns worsen about banks following the second- and third-largest U.S. bank failures in history. The fear is that the trouble for banks caused by fast-rising interest rates could drag the economy into a recession. Treasury yields sank again Friday in part on such fears, along with easing inflation expectations and falling confidence among U.S. households.

    On Friday:

    The S&P 500 fell 43.64 points, or 1.1%, to 3,916.64.

    The Dow Jones Industrial Average fell 384.57 points, or 1.2%, to 31,861.98.

    The Nasdaq composite fell 86.76 points, or 0.7%, to 11,630.51.

    The Russell 2000 index of smaller companies fell 45.34 points, or 2.6%, to 1,725.90.

    For the week:

    The S&P 500 is up 55.05 points, or 1.4%.

    The Dow is down 47.66 points, or 0.1%.

    The Nasdaq is up 491.63 points, or 4.4%.

    The Russell 2000 is down 46.81 points, or 2.6%

    For the year:

    The S&P 500 is up 77.14 points, or 2%.

    The Dow is down 1,285.27 points, or 3.9%.

    The Nasdaq is up 1,164.03 points, or 11.1%.

    The Russell 2000 is down 35.35 points, or 2%

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  • Stocks slip as worries worsen about banks, still up for week

    Stocks slip as worries worsen about banks, still up for week

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    NEW YORK — Stocks are slipping on Wall Street Friday as worries worsen about the banking industry and a week of turmoil nears its close.

    The S&P 500 was 0.4% lower in early trading, cutting into its gain for the week. The Dow Jones Industrial Average was down 229 points, or 0.7%, at 32,017, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.2% lower.

    This week has been a whipsaw for markets around the world as worries rise about the banking industry following the second- and third-largest U.S. bank failures in history. Just a day earlier, markets rallied in relief after two banks on both sides of the Atlantic tapped into tens of billions of dollars of cash to bolster their finances.

    But on Friday, some of the hope was washing out, and the pair were back to falling. In Switzerland, Credit Suisse shares dropped 8.5%. On Wall Street, shares of First Republic Bank sank nearly 20% and were on their way to a 66% plunge for the week.

    The two banks have different sets of issues challenging them, but the overriding fear is that the banking system may be cracking under the weight of the fastest set of hikes to interest rates in decades.

    Analysts have been quick to say the current chaos for banks looks nowhere near as bad as the 2007-08 financial crisis that ruined the global economy. But the troubles still feed into concerns about a recession because problems for banks could mean problems for smaller and mid-sized companies getting the loans they need to grow.

    In “the biggest picture: since 1870 there have been 14 big world recessions, all driven by wars, pandemics & banking crises,” investment strategist Michael Hartnett wrote in a BofA Global Research report.

    Banks have borrowed nearly $165 billion from the Federal Reserve over the last week in a sign of how much stress is in the system.

    After years of enjoying historically easy conditions, banks and the economy are now getting a shock to the system after the Federal Reserve and other central banks have jacked up interest rates at a blistering pace. The moves are meant to get the world’s high inflation under control.

    Higher rates can indeed help tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank, which collapsed Friday. High races had undercut the value of its bond investments.

    Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    That’s why Wall Street has been so keyed in on San Francisco-based First Republic. A group of 11 of the biggest banks on Thursday said they would deposit a combined $30 billion in the bank to show their confidence in it and banks in general.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    Some of the wildest action has been in the bond market, where yields have swung as traders drastically recalibrate bets for where the Fed will take rates.

    The yield on the two-year Treasury, which tends to closely track expectations for the Fed, fell to 4.01% from 4.17% late Thursday. It was above 5% last week and at its highest level since 2007. That’s a massive move for the bond market.

    Traders largely expect this week’s turmoil to push the Federal Reserve to hike interest rates at its next meeting by only a quarter of a percentage point. That would be the same sized increase as last month’s and half the hike of 0.50 points that was expected earlier.

    Such easing expectations have helped several Big Tech stocks to lead the market this week. They’ve had their own problems, but they tend to benefit from lower interest rates. Partly because of that, the S&P 500 is still on track for its best weekly gain since January. It’s up 2.1%.

    Cryptocurrencies have shot even higher this week. Bitcoin is up more than 30%.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    ___

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

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  • Asian shares up after First Republic aid spurs Wall St rally

    Asian shares up after First Republic aid spurs Wall St rally

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    BANGKOK — Shares advanced Friday in Asia, tracking a rally on Wall Street after a group of big banks offered a lifeline to First Republic Bank, the lender investors had focused on in their latest hunt for troubles in the banking industry.

    Benchmarks rose more than 1% in Hong Kong, Taiwan and Tokyo. U.S. futures were mixed and oil prices climbed.

    The S&P 500 jumped 1.8% Thursday, erasing earlier losses following reports that First Republic Bank could get help or sell itself to another bank. Markets have gyrated this week on concerns over the toll on banks from the fastest set of interest rate hikes in decades. The turmoil flared with last week’s collapse of Silicon Valley Bank, the second largest bank failure in U.S. history.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    In Asia, Hong Kong’s Hang Seng jumped 1.1% to 19,422.81 and the Shanghai Composite index added 0.8% to 3,249.23.

    Tokyo’s Nikkei 225 index gained 1.2% to 27,333.79 and the Kospi in Seoul was up 0.7% at 2,394.27. Shares in major Japanese banks, which fell sharply at times this week, were mostly slightly higher.

    Australia’s S&P/ASX 200 added 0.4% to 6,994.80. India’s Sensex was 0.1% higher while Taiwan’s Taiex surged 1.5%.

    Stocks rallied Thursday on Wall Street after 11 of the biggest banks offered help for First Republic with a combined deposit of $30 billion.

    All told, the S&P 500 rose 68.35 points to 3,960.28. The Dow gained 1.2% to 32,246.55 and the Nasdaq jumped 2.5% to 11,717.28.

    Since SVB’s failure, investors have been on the lookout for banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    First Republic Bank rose 10% Thursday after slumping as much as 36% early in the day.

    The Federal Reserve’s fastest barrage of hikes to interest rates in decades, to drive down inflation, has shocked the banking system following years of historically easy conditions.

    Higher rates raise the risk of a recession later on and hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

    U.S. Treasury Secretary Janet Yellen told a Senate committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

    Wall Street increasingly expects this week’s turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, half the hike of 0.50 points that was earlier expected.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    All the stress in the banking system has raised worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

    Reports on the U.S. economy are showing mixed signals. A report said fewer workers applied for unemployment benefits last week than expected.

    In other trading, U.S. benchmark crude oil gained 44 cents to $68.79 a barrel in electronic trading on the New York Mercantile Exchange. It picked up 74 cents on Thursday to $68.35 a barrel.

    Brent crude, the pricing basis for international trading, climbed 46 cents to $75.16 a barrel.

    The dollar fell to 132.93 Japanese yen from 133.76 yen. The euro rose to $1.0648 from $1.0611.

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  • Stocks flip to gains on Wall Street, Treasury yields swing

    Stocks flip to gains on Wall Street, Treasury yields swing

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    NEW YORK — Stocks flipped to gains Thursday amid hopes for help for a bank at the center of Wall Street’s hunt for what’s next to crack in the struggling industry.

    The S&P 500 was 0.8% higher in midday trading after erasing an earlier loss of nearly that much following reports that First Republic Bank could receive financial assistance or sell itself to another bank.

    The Dow Jones Industrial Average was up 103 points, or 0.3%, at 31,978, as of 11:20 a.m. Eastern time, while the Nasdaq composite was 1.3% higher.

    This week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest set of hikes to interest rates in decades. The crisis of confidence has been flaring since Friday’s collapse of Silicon Valley Bank, which was the second largest bank failure in U.S. history.

    Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    First Republic Bank has been at the center of the market’s swivels, and it fell 28.3%. It’s down nearly 73% this week alone.

    But big banks including JPMorgan Chase and Morgan Stanley are discussing a potential deal that could mean a big infusion of cash for the bank, according to a report from The Wall Street Journal.

    Financial stocks across the S&P 500 flipped from losses in the morning to gains by midday. Treasury yields also strengthened suddenly, a sign of increased confidence from the bond market.

    Across the Atlantic, European stocks rose after the European Central Bank announced a hefty increase to interest rates. They were also stabilizing after dropping sharply Wednesday on worries about Credit Suisse. The Swiss bank has been battling troubles for years, but its plunge to a record low raised concerns just as more attention shines on the wider industry.

    Credit Suisse’s stock in Switzerland leaped 17.8% Thursday after it said it will strengthen its finances by borrowing up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

    Treasury Secretary Janet Yellen told the Senate Finance Committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

    Much of the damage for banks is seen as the result of the Federal Reserve’s fastest barrage of hikes to interest rates in decades. They’ve shocked the system following years of historically easy conditions in hopes of driving down painfully high inflation.

    Higher rates can tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

    Wall Street increasingly expects banks’ struggles to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, and it would be counter to expectations from earlier this month that it could hike by 0.50 points as it had been potentially signaling.

    Some traders are also betting on the possibility the Fed could take a pause on rate hikes next week. just

    The European Central Bank on Thursday raised its key interest rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    Some of Wall Street’s wildest action this week has been in the bond market, as traders rush to guess where the Fed is heading.

    The yield on the 10-year Treasury fell to 3.44% from 3.47% late Wednesday. It was above 4% earlier this month, and it helps set rates for mortgages and other important loans.

    All the stress in the banking system is raising worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

    Economists at Goldman Sachs said all the near-term uncertainty surrounding small banks mean they see a 35% probability of a recession in the next 12 months. That’s up from their prior forecast of 25%.

    Reports on the U.S. economy, meanwhile, continue to show mixed signals.

    The job market looks remarkably solid, and a report said fewer workers applied for unemployment benefits last week than expected. .

    But other pockets of the economy are continuing to show weakness. Manufacturing has struggled, for example, and a measure of activity in the mid-Atlantic region weakened by more than expected.

    The housing market has also been struggling under the weight of higher mortgage rates, though homebuilders broke ground on more projects last month than expected. That could be a signal the industry is finding some stability.

    ___

    AP Business Writers Joe McDonald and Matt Ott contributed.

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  • Despite market slump, high rates dim homebuyer affordability

    Despite market slump, high rates dim homebuyer affordability

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    LOS ANGELES — Homeownership is likely to remain a pipe dream for many Americans this spring homebuying season.

    The nation’s worst housing slump in nearly a decade stoked hope among prospective buyers that homes could be scooped up more easily. But while prices appear to have peaked last summer, they still ended 2022 higher than they were at the end of 2021. And the median U.S. home price has increased 42% since 2019.

    A series of interest rate increases by the Federal Reserve last year is making matters worse for homebuyers, pushing mortgage rates to their highest level in two decades.

    The average long-term rate on a 30-year mortgage reached a two-decade high of 7.08% in the fall. Rates eased in December and January, but have been climbing since early February. The average rate hit 6.73% last week, the highest level since early November. A year ago, it averaged 3.85%.

    That rate translates into a roughly 49% increase in the monthly payment on a median-priced U.S. home than a year ago, said George Ratiu, senior economist at Realtor.com.

    “For real estate markets, the rise in rates means higher mortgage payments, deepening the affordability challenge just as we move into the crucial spring homebuying season,” he said.

    For prospective buyers holding out for a meaningful dip in mortgage rates, they may be in for a long wait. Zillow recently polled 100 economists and real estate experts on their outlook for what the average rate on a 30-year mortgage will be by the end of this year and the median forecast was 6%.

    Stronger-than-expected reports on the economy this year have fueled expectations that the Federal Reserve may have to keep pushing up its key borrowing rate to tame inflation, deepening the affordability challenge for would-be buyers like Joe Arndt in Reiserstown, Maryland.

    The 28-year-old athletic trainer has been looking to buy a home in the Baltimore area for over a year, but hasn’t found much he can afford within his $225,000-$250,000 price range. He now feels shut out of the market.

    “I thought that things would start to cool down a little bit more,” Ardnt said. “Prices are still the same as they were a year ago, if not a little higher.”

    Another factor that may keep people out of the housing market is the fact that the amount of money a typical homebuyer needs to earn in order to afford a house continues to climb. In the fourth quarter of last year, you had to make at least $80,142 a year to buy a home at the national median price of $325,000, according to an analysis by Attom, a real estate information company. That’s a nearly 36% increase from the same quarter in 2021.

    The analysis, which was based on data from 581 counties, defines an affordable home purchase as a transaction that includes a 20% down payment and monthly costs for the mortgage payment, property taxes and insurance that don’t exceed 28% of the buyer’s annual income.

    One market shift that could help make homes more affordable is a significant increase in homes for sale. Nationally, there are more available now than a year ago, and that’s likely to increase in coming weeks as traditionally more homes hit the market in the spring months.

    The number of homes for sale rose for the first time in five months in January to 980,000, up 15.3% from a year earlier, according to the National Association of Realtors. That amounts to a 2.9-month supply at the current sales pace — better than in January last year.

    But it’s still far from the 5- to 6-month supply that reflects a more balanced market between buyers and sellers. And the prospects for a bigger spike in supply are slim, given that new construction hasn’t kept up pace with demand after years of underbuilding following the housing crash in 2008. At the same time, most homeowners with a mortgage have locked in ultra-low rates over the years and have less financial incentive to sell.

    It’s not all bad news for buyers. The bidding wars that led to homes often selling for well above asking prices a year ago are less common as higher mortgage rates have forced some buyers out of the market. And data show sellers are more willing to lower their asking price than they were a year ago.

    Sobhit Haribhakti, 29, and his fiancée Sierra McNeilly, 26, were worried higher borrowing costs would hamper their bid to become homeowners. But the couple, who live in the Cleveland suburb of Strongsville, were able to find a house they could afford.

    The couple got a two-bedroom, two-and-a-half-bathroom house for around $230,000, or $15,000 below asking price, and financed the purchase with a 30-year mortgage with a fixed rate of 5.75%. The seller also kicked in $10,000 toward their closing costs.

    “We’re definitely going to refinance at some point,” Haribhakti said. “But it seems like the way it worked out we got a pretty good amount of seller concessions.”

    Buyers like Haribhakti and McNeilly who can make the homebuying math work have some trends in their favor. For one, homes are taking longer to sell. On average, homes sold in 33 days of hitting the market in January, up from 19 days a year earlier, according to the National Association of Realtors.

    That’s pushing some sellers to lower prices. In January, about 190,000 homes on the market had their price reduced, a nearly threefold increase from a year earlier, according to Realtor.com.

    Many buyers are also increasingly opting for a mortgage rate buydown, which lowers the rate on their home loan for a few years or for the life of the loan and thus reduces the homebuyer’s overall borrowing costs. In exchange, buyers pay fees as part of their closing costs to cover the rate buydown.

    Some sellers are even offering to cover those closing costs for a buyer to get the deal done.

    Scott Collett, an account manager in Tampa, Florida, recently negotiated a seller-paid mortgage rate buydown to close the deal on a four-bedroom, two-bathroom house with a pool. The property, which had been on the market for nearly a year, was reduced from $495,000 to $419,000.

    “I basically offered what they were asking at that point in time, as they paid all the closing costs and inspection fees and everything,” said Collett, 49.

    The rate on his 30-year loan dropped from 6.25% to 5.26%, an improvement, but still higher than a year ago when rates averaged below 4%.

    For Collett, it was worth it.

    “My thought was that if I had a higher interest rate, I’d pay less for the house, but I could also refinance,” he said.

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  • Asian stocks higher after Wall St rebounds from bank jitters

    Asian stocks higher after Wall St rebounds from bank jitters

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    BEIJING — Asian stock markets rebounded Wednesday after Wall Street stabilized following declines for bank stocks and U.S. inflation eased but stayed high.

    Shanghai, Tokyo, Hong Kong and Sydney advanced. Oil prices rose more than $1 per barrel, recovering some of the previous day’s losses.

    Wall Street’s benchmark S&P 500 index rose Tuesday as bank stocks recovered some of their losses caused by worries customers might pull out deposits following the collapse of two U.S. lenders.

    Stocks rose despite data showing prices rose 6% over a year ago in February, decelerating from the previous month’s 6.4% but above the Federal Reserve’s 2% target.

    “The anchoring of less hawkish expectations provided some catalyst for risk sentiments to recover,” said Yeap Jun Rong of IG in a report. “There were also no new negative headlines of another bank or funds in trouble, which allows investors’ sentiments to settle down.”

    Investors had worried the Fed might respond to enduring upward pressure on prices by speeding up the pace of interest rate increases to dampen economic activity and inflation. But those jitters were overshadowed by anxiety about the U.S. financial system following the collapse of Silicon Valley Bank on Friday and Signature Bank on Sunday. President Joe Biden and regulators tried to assure the public risks were contained and deposits in other banks were safe.

    Tuesday’s data showed core inflation, with volatile energy and food prices stripped out to show a clearer trend, was 0.5% in February over the previous month, edging up from January’s 0.4% gain. The Fed pays close attention to core inflation in making monetary policy.

    The Fed faces a dilemma over how to respond when banks already are under strain after the fastest pace of rate hikes in a decade knocked down prices of their assets.

    The Shanghai Composite Index rose 0.7% to 3,267.15 after Chinese economic activity improved in January and February but less than expected after anti-virus controls ended. Retail sales rose 3.5% over a year earlier, rebounding from December’s 1.% contraction. Factory output rose 2.4%, up from 1.3%.

    The Nikkei 225 in Tokyo advanced 0.1% to 27,258.01 after major Japanese companies announced they had agreed with unions to the biggest wage increases in almost two decades. Low wages are seen as a major drag on economic growth in Japan, but fewer than one in five Japanese workers belong to unions.

    The Hang Seng in Hong Kong jumped 1.3% to 19,490.35 and the Kospi in Seoul surged 1.5% to 2,384.38.

    India’s Sensex opened up 0.2% at 58,297.50. New Zealand and Southeast Asian markets advanced.

    Traders rushed Monday to place bets that the Fed could keep rates steady at its next meeting, instead of accelerating to a hike of 0.50 percentage points, double last month’s margin, according to data from CME Group.

    On Wall Street, the S&P 500 rose 1.7% to 3,920.56, reversing from a three-day string of declines.

    The Dow Jones Industrial Average rose 1.1% to 32,155.40. The Nasdaq added 2.1% to 11,428.15.

    First Republic Bank jumped 27% after plunging 67.5% over the prior three days. KeyCorp gained 6.9%, Zions Bancorp. rose 4.5% and Charles Schwab climbed 9.2%.

    The yield on a two-year Treasury, or the difference between the market price and the payout at maturity, climbed back to 4.21% from 4.02% late Monday, another huge move. The yield on the 10-year Treasury jumped to 3.66% from 3.55%.

    In energy markets, benchmark U.S. crude rose $1.08 to $72.41 per barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $3.47 on Tuesday to $71.33. Brent crude, the price basis for international oil trading, advanced $1.09 to $78.54 per barrel in London. It lost $3.32 the previous day to $77.45.

    The dollar declined to 134.09 yen from Tuesday’s 134.19 yen. The euro rose to $1.0754 from $1.0741.

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  • Asian shares extend losses as US banking worries persist

    Asian shares extend losses as US banking worries persist

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    TOKYO — Asian shares declined Tuesday, with heavy selling of banks shares in Tokyo and some other markets, as investors around the world watched to see what’s next following the second- and third-largest bank failures in U.S. history.

    Direct exposure to the risks from the U.S. failures in Asia seemed slim, at least so far. Still, fears of contagion persisted, sending regional benchmarks lower across the region.

    Japan’s benchmark Nikkei 225 dropped 2.2% to finish at 27,222.04, extending losses from the day before.

    Bank shares plunged. MUFG fell 8.6%, Mizuho Financial Group sank 7.1% and Sumitomo Mitsui Financial Group’s shares dropped 9.8%. Tech sector companies also were sold, with SoftBank shares losing 4.1% and Sony Group down 2.8%.

    Banks in South Korea and Australia also declined.

    Australia’s S&P/ASX 200 dipped 1.4% to 7,008.90. South Korea’s Kospi fell 2.6% to 2,349.19. Hong Kong’s Hang Seng fell 2.4% to 19,233.51. The Shanghai Composite declined 0.6% to 3,247.81.

    “There is escalating tension in the global financial world; this is despite non-U.S. banks’ exposure to US regional banks being minimal, with the global systems being well capitalized and flush with liquidity,” Stephen Innes, managing partner at SPI Asset Management, said in a report.

    “U.S. financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets.”

    On Monday, Japan’s chief government spokesman, Hirokazu Matsuno, told reporters that the impact on Japanese banks would likely be limited. Finance Minister Shunichi Suzuki, echoed similar sentiments Tuesday, stressing that Japan’s fiscal system remained stable, stressing the “low likelihood” of any negative effects.

    The biggest price declines so far on Wall Street have also been with banks. On Monday, other stocks rose on hopes the bloodletting will force the U.S. Federal Reserve to take it easier on the hikes to interest rates that are shaking Wall Street and the economy.

    Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system.

    On Wall Street, the S&P 500 dipped 0.2% to 3,855.76 after whipsaw trading, where it careened from an early loss of 1.4% to a midday gain of nearly that much. The Dow Jones Industrial Average fell 0.3% to 31,819.14, while the Nasdaq composite rose 0.4% to 11,188.84.

    The U.S. government announced a plan late Sunday meant to shore up confidence in the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

    The heaviest pressure is on the regional banks a couple steps below in size of the massive, “too-big-to-fail” banks that foundered in 2007 and 2008. Shares of First Republic Bank fell 61.8%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

    Huge banks, which have been repeatedly stress-tested by regulators following the 2008 financial crisis, weren’t down as much. JPMorgan Chase fell 1.8%, and Bank of America dropped 5.8%.

    Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding. Rate cuts often act like steroids for the stock market. The wider expectation, though, is that the Fed will likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

    That would still be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed could go back to increasing the size of its rate hikes to tame stubbornly high inflation.

    Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds sitting in investors’ portfolios.

    Prices for Treasurys shot higher as investors sought safety and as their expectations grew for an easier Fed. That in turn sent their yields lower, The yield on the 10-year Treasury was steady at 3.56%, down from 3.70% late Friday. That’s a major move for the bond market.

    The two-year yield, which moves more on expectations for the Fed, fell to 3.99% from 4.59% Friday. It was above 5% earlier this month.

    In energy trading, benchmark U.S. crude lost 91 cents to $73.89 a barrel in electronic trading on the New York Mercantile Exchange. It fell $1.88 to $74.80 a barrel on Monday.

    Brent crude, the international standard, lost 89 cents to $79.88 a barrel.

    In currency trading, the U.S. dollar rose to 133.51 Japanese yen from 133.20 yen. The euro cost $1.0697, down from $1.0734.

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  • Bank stocks plunge and S&P 500 swings as Wall Street shakes

    Bank stocks plunge and S&P 500 swings as Wall Street shakes

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    NEW YORK — Wall Street is worried about what may be next to topple following the second- and third-largest bank failures in U.S. history, and stocks are swinging sharply Monday as investors scramble to find someplace safe to park their money.

    The S&P 500 was virtually unchanged in morning trading, but only after tumbling 1.4% at the open. The sharpest drops were again coming from banks. Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system and broader economy.

    The U.S. government announced a plan late Sunday meant to shore up the banking industry following the collapses of Silicon Valley Bank and Signature Bank since Friday.

    The most pressure is on the regional banks one or two steps below in size of the massive, “too-big-to-fail” banks that helped take down the economy in 2007 and 2008. Shares of First Republic plunged 66.3%, even after the bank said Sunday it had strengthened its finances with cash from the Federal Reserve and JPMorgan Chase.

    “So far, it seems that the potential problem banks are few, and importantly do not extend to the so-called systemically important banks,” analysts at ING said.

    The broader market was holding up better as expectations built that the all the chaos means the Fed would have to take it easier on its economy-rattling hikes to interest rates. The Dow Jones Industrial Average was up 94 points, or 0.3%, at 32,004 as of 10 a.m. Eastern time, while the Nasdaq composite was 0.1% higher. Both erased sharp earlier losses.

    Stock markets were mixed in Asia after the U.S. government announced its plan to protect depositors at banks, but the losses deepened as trading headed westward through Europe. Germany’s DAX lost 3.3% as bank stocks across the continent sank. On Wall Street, a measure of fear among stock investors touched its highest level since October.

    Among the few investments to climb in price was gold, as investors looked for anything that seemed safe. It rose 2.3% to $1,910.50 per ounce.

    Prices for Treasurys also shot higher on both demand for something safe and expectations for an easier Fed. That in turn sent their yields lower, and the yield on the 10-year Treasury plunged to 3.51% from 3.70% late Friday. That’s a major move for the bond market. It was above 4% earlier this month.

    The two-year yield, which moves more on expectations for the Fed, had an even more breath-taking drop. It fell to 4.12% from 4.59% Friday.

    Some investors are calling for the Fed to make emergency cuts to interest rates soon to stanch the bleeding. The wider expectation, though, is that the Fed will likely pause or slow its increases.

    Traders are betting on a nearly four-in-five chance that the Fed will hike its key overnight interest rate by 0.25 percentage points later this month at its next meeting. They’re also now betting on a 21% chance that it will hold steady, according to CME Group.

    That’s a sharp turnaround from earlier last week, when many traders were betting on the Fed reaccelerating its hikes and increasing by 0.50 percentage points because of how stubbornly sticky high inflation has been.

    “At this point in time, depending on reactions in financial markets and eventual fallout on the overall economy, we wouldn’t rule out that the hiking cycle could even be over and that the next move by Fed officials may be lower not higher,” said Kevin Cummins, chief U.S. economist at NatWest.

    Higher interest rates can drag down inflation by slowing the economy, but they raise the risk of a recession later on. They also hit prices for stocks, as well as bonds already sitting in investors’ portfolios.

    That latter effect is one of the reasons for the worries about the banking system. The Fed began hiking interest rates almost exactly a year ago, and it’s instituted the sharpest flurry in decades. Its key overnight rate is now at a range of 4.50% to 4.75%, up from virtually zero.

    That has hurt the investment portfolios of banks, which often park their cash in Treasurys because they’re considered among the safest investments on Earth.

    The collapse of Silicon Valley Bank has reverberated around the world.

    In London, the government arranged the sale of Silicon Valley Bank UK Ltd., the California bank’s British arm, for the nominal sum of one British pound, or roughly $1.20.

    While the bank is small, with less than 0.2% of U.K. bank deposits according to central bank statistics, it had a large role in financing technology and biotech startups that the British government is counting on to fuel economic growth.

    Germany’s financial regulator, BaFin, on Monday prohibited asset disposals and payments by Silicon Valley Bank’s German branch and imposed a moratorium, effectively shutting it for dealings with customers.

    Before trading began in Asia, the U.S. Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

    Regulators on Friday closed Silicon Valley Bank as investors withdrew billions of dollars from the bank in a matter of hours, marking the second-largest U.S. bank failure behind the 2008 failure of Washington Mutual. They also announced Sunday that New York-based Signature Bank was being seized after it became the third-largest bank to fail in U.S. history.

    ___

    AP Business Writers David McHugh, Yuri Kageyama and Matt Ott contributed.

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  • Asian shares mixed despite jitters after US bank failure

    Asian shares mixed despite jitters after US bank failure

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    TOKYO — Asian shares were trading mixed Monday, shaken by a Wall Street tumble that set off worries the biggest United States bank failure in nearly 15 years might have ripple effects around the world.

    But the falls were relatively subdued because of reassurances from U.S. officials that financial shocks would be mitigated, sending U.S. futures higher.

    Japan’s benchmark Nikkei 225 slipped 1.1% to finish at 27,832.96. Australia’s S&P/ASX 200 lost 0.5% to 7,108.80. South Korea’s Kospi recouped earlier losses to gain 0.8% to 2,412.84.

    Hong Kong’s Hang Seng jumped 1.9% to 19,683.23. The Shanghai Composite rose nearly 1.1% to 3,263.88, as Chinese shares tracked a gain in U.S. futures. Dow futures were up 1.2% at 32,552.00. S&P 500 futures rose 1.7% to 3,964.00. Oil prices vacillated throughout the day.

    Recent developments in Chinese politics have worked as a stabilizing factor. Major posts, including the governor of the Bank of China, were announced, signaling a continuation of policy.

    Before trading began in Asia, the U.S. Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

    Regulators closed Silicon Valley Bank on Friday amid a run on the bank, which was the second-largest U.S. bank failure behind the 2008 failure of Washington Mutual. They also announced Sunday that New York-based Signature Bank was being seized after it became the third-largest bank failure in U.S. history.

    Following two bank failures, worries about financial stability and liquidity concerns were dominating the market landscape, said Stephen Innes, managing partner at SPI Asset Management in Hong Kong.

    He said traders made nervous by the weekend’s news could create “a ready-aim-fire Monday open.”

    “With the market likely headed for a more turbulent period with US inflation on a collision course with Bank ‘theater of tragedy,’ now is probably not the best time for investor euphoria,” Innes said.

    But the sense that U.S. authorities were taking steps to limit “the contagion effect” helped calm the situation somewhat, although “markets remain skittish” in Asia, said Venkateswaran Lavanya at Mizuho Bank.

    Unemployment data for Australia for February will be released Thursday. A gain of 50,000 jobs is expected, after two straight months of losses, and the unemployment rate is expected to move one tick lower to 3.6%, according to RaboResearch.

    Shares had tanked Friday on Wall Street, with the S&P 500 dropping 1.4% to cap its worst week since September.

    The Dow Jones Industrial Average fell 1.1% to 31,909.64, while the Nasdaq composite sank 1.8% to 11,138.89. The S&P 500 fell 56.73 points to 3,861.59.

    Some of the sharpest drops on Wall Street last week came from the financial industry. First Republic Bank tumbled 14.8%, while Charles Schwab lost another 11.7% after dropping 12.8% on Thursday. Larger banks, which have been stress-tested by regulators following the 2008 financial crisis, held up better. JPMorgan Chase rose 2.5%.

    In Tokyo trading, banking issues were sold, with MUFG Bank falling 3.5%, echoing such falls on Wall Street. Shares in Mitsui Sumitomo Financial Group dipped 4%.

    Worries grew recently that interest rates are set to go higher than expected after the Fed Reserve said it could reaccelerate the size of its rate hikes. The Fed is focusing on wage growth in particular in its fight against inflation. It worries too-high gains could cause a vicious cycle that worsens inflation.

    Traders now largely expect the Fed to stick with a modest 0.25 point hike. Last month, the Fed slowed to that pace after earlier hiking by 0.50 and 0.75 points. The Fed has already raised rates at the fastest pace in decades and made other moves to reverse its tremendous support for the economy during the pandemic.

    In energy trading, benchmark U.S. crude gained 29 cents to $76.97 a barrel. Brent crude, the international standard, rose 31 cents to $83.09 a barrel.

    In currency trading, the U.S. dollar fell to 134.40 Japanese yen from 134.96 yen. The euro cost $1.0718, up from $1.0643.

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  • Asian shares mostly sink on jitters after US bank failure

    Asian shares mostly sink on jitters after US bank failure

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    TOKYO — Asian shares mostly fell Monday, shaken by a Wall Street tumble that set off worries the biggest U.S. bank failure in nearly 15 years might have ripple effects around the world.

    Japan’s benchmark Nikkei 225 slipped 1.8% to 27,643.59 in morning trading. Australia’s S&P/ASX 200 lost 0.7% to 7,098.20. South Korea’s Kospi shed 0.8% to 2,375.80. Hong Kong’s Hang Seng rose 0.5% to 19,421.05. The Shanghai Composite rose 0.4% to 3,243.82.

    Before trading began in Asia, the U.S. Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

    Regulators closed Silicon Valley Bank on Friday amid a run on the bank, which was the second-largest U.S. bank failure, behind the 2008 failure of Washington Mutual. They also announced Sunday that New York-based Signature Bank was being seized after it became the third-largest bank failure in U.S. history.

    Following two bank failures, worries about financial stability and liquidity concerns were dominating the market landscape, said Stephen Innes, managing partner at SPI Asset Management in Hong Kong.

    He said traders made nervous by the weekend’s news could create “a ready-aim-fire Monday open.”

    “With the market likely headed for a more turbulent period with US inflation on a collision course with Bank ‘theater of tragedy,’ now is probably not the best time for investor euphoria,” Innes said.

    But the sense that U.S. authorities were taking some steps to limit “the contagion effect” had somewhat of a calming effect, although “markets remain skittish” in Asia, said Venkateswaran Lavanya at Mizuho Bank.

    Shares had tanked Friday on Wall Street, with the S&P 500 dropping 1.4% to cap its worst week since September.

    The Dow Jones Industrial Average fell 345 points, or 1.1%, while the Nasdaq composite sank 1.8%. The S&P 500 fell 56.73 points to 3,861.59. The Dow lost 345.22 to 31,909.64, and the Nasdaq dropped 199.47 to 11,138.89.

    Some of the sharpest drops on Wall Street last week came from the financial industry. First Republic Bank tumbled 14.8%, while Charles Schwab lost another 11.7% after dropping 12.8% Thursday. Larger banks, which have been stress-tested by regulators following the 2008 financial crisis, held up better. JPMorgan Chase rose 2.5%.

    In Tokyo trading, banking issues were sold, with MUFG Bank falling 3%, echoing such falls on Wall Street. Shares in Mitsui Sumitomo Financial Group dipped 3.7% in morning trading.

    Worries were growing recently that interest rates are set to go higher than expected after the Fed Reserve said it could reaccelerate the size of its rate hikes. The Fed is focusing on wage growth in particular in its fight against inflation. It worries too-high gains could cause a vicious cycle that worsens inflation.

    Traders now largely expect the Fed to stick with a modest 0.25 point hike. Last month, the Fed slowed to that pace after earlier hiking by 0.50 and 0.75 points. The Fed has already raised rates at the fastest pace in decades and made other moves to reverse its tremendous support for the economy during the pandemic.

    In energy trading, benchmark U.S. crude rose 53 cents to $77.21 a barrel. Brent crude, the international standard, rose 51 cents to $83.29 a barrel.

    In currency trading, the U.S. dollar fell to 134.50 Japanese yen from 134.96 yen. The euro cost $1.0681, up from $1.0643.

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  • Oil giant Saudi Aramco has profits of $161B in 2022

    Oil giant Saudi Aramco has profits of $161B in 2022

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    DUBAI, United Arab Emirates — Oil giant Saudi Aramco reported Sunday its profits surged to $161 billion last year off higher crude prices, a record result for an energy firm crucial to the kingdom’s economy.

    The firm, known formally as the Saudi Arabian Oil Co., said in its annual report that the profit represented “its highest annual profits as a listed company.” That came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and natural gas in Western markets.

    Aramco also hopes to increase its production to take advantage of market demand, raising the billions needed to pay for Crown Prince Mohammed bin Salman’s plans to develop futuristic cityscapes to pivot Saudi Arabia away from oil.

    However, those plans come despite growing international concerns over the burning of fossil fuels accelerating climate change.

    “Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices,” Saudi Aramco CEO and President Amin H. Nasser said in a statement.

    Profits rose 46.5% when compared to the company’s 2021 results of $110 billion. It earned $49 billion in 2020 when the world faced the worst of the coronavirus pandemic lockdown, travel disruptions and oil prices briefly going negative.

    Aramco put its crude production at around 11.5 million barrels a day in 2022 and said it hoped to reach 13 million barrels a day by 2027.

    To boost that production, it plans to spend as much as $55 billion this year on capital projects.

    Aramco also declared a dividend of $19.5 billion for the fourth quarter of 2022, to be paid in the first quarter of this year.

    Benchmark Brent crude oil now trades around $82 a barrel, though prices had reached over $120 a barrel back in June. Aramco, whose fortunes hinge on global energy prices, announced a record $42.4 billion profit in the third quarter of 2022 off the back of that price spike.

    Those high prices have further strained ties between the kingdom and the United States, traditionally a security guarantor among the Gulf Arab states amid tensions with Iran. Before the midterm elections in November, the kingdom said the Biden administration sought to delay a decision by OPEC and allies including Russia to cut production that could have kept gasoline prices lower for voters — making public the typically behind-the-scenes negotiations common in the region.

    President Joe Biden had warned the kingdom that “there’s going to be some consequences for what they’ve done” in terms of oil prices. However, those consequences have yet to be seen as Saudi Arabia and Iran went to China to strike a diplomatic deal Friday. U.S. gasoline prices now stand on average at $3.47 a gallon, down just about a dollar from last year.

    For the kingdom, higher crude oil prices can help fuel the dreams of Prince Mohammed, including his planned $500 billion futuristic desert city project called Neom. However, they also run against the fears of activists over climate change, particularly as the United Nations’ COP28 climate talks will begin this November in the neighboring United Arab Emirates.

    Saudi Arabia has pledged to have net-zero carbon emissions by 2060, like China and Russia, though its plans to reach that goal remain unclear. Aramco’s earnings report noted it started a $1.5 billion Sustainability Fund in October and plans a carbon-capture-and-storage facility as well.

    Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.

    Shares in Aramco stood at $8.74 on Riyadh’s Tadawul stock exchange before it opened Sunday. That’s down from a high of $11.55 a share in the last year. However, that current price still gives Aramco a valuation of $1.9 trillion — making it the world’s second most valuable company behind only Apple. The Saudi government still owns the vast majority of the firm’s shares.

    ___

    Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.

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  • Oil giant Saudi Aramco has profits of $161B in 2022

    Oil giant Saudi Aramco has profits of $161B in 2022

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    DUBAI, United Arab Emirates — Oil giant Saudi Aramco said Sunday it earned a $161 billion profit last year, attributing its earnings to higher crude oil prices.

    The firm, known formally as the Saudi Arabian Oil Co., said in its annual report that the profit represented “its highest annual profits as a listed company.”

    “Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices,” Saudi Aramco CEO and President Amin H. Nasser said in a statement.

    Nasser said Aramco would spend $37.6 billion to expand its production capacity.

    Aramco also declared a dividend of $19.5 billion for the fourth quarter of 2022, to be paid in the first quarter of this year.

    In 2021, Aramco declared profits of $110 billion, as compared to $49 billion in 2020 when the world faced the worst of the coronavirus pandemic lockdown, travel disruptions and oil prices briefly going negative.

    Benchmark Brent crude oil now trades around $82 a barrel, though prices had reached over $120 a barrel back in June. Aramco, whose fortunes hinge on global energy prices, announced a record $42.4 billion profit in the third quarter of 2022 off the back of that price spike.

    Those high prices have further strained ties between the kingdom and the United States, traditionally a security guarantor among the Gulf Arab states amid tensions with Iran. Before the midterm elections in November, the kingdom said the Biden administration sought to delay a decision by OPEC and allies including Russia to cut production that could have kept gasoline prices lower for voters — making public the typically behind-the-scenes negotiations common in the region.

    President Joe Biden had warned the kingdom that “there’s going to be some consequences for what they’ve done” in terms of oil prices. However, those consequences have yet to be seen as Saudi Arabia and Iran went to China to strike a diplomatic deal Friday. U.S. gasoline prices now stand on average at $3.47 a gallon, down just about a dollar from last year.

    Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.

    Shares in Aramco stood at $8.74 on Riyadh’s Tadawul stock exchange before it opened Sunday. That’s down from a high of $11.55 a share in the last year. However, that current price still gives Aramco a valuation of $1.9 trillion — making it the world’s second-most valuable company behind only Apple. The Saudi government still owns the vast majority of the firm’s shares.

    ___

    Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.

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  • Wall Street futures lower ahead of US jobs update

    Wall Street futures lower ahead of US jobs update

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    Wall Street futures were modestly lower Friday ahead of a U.S. job market update amid unease about possible further interest rate hikes.

    Futures for the Dow Jones Industrial Average slipped 0.3% and futures for the S&P 500 were off 0.2%.

    The S&P 500 index fell Thursday by its biggest one-day margin this year after Federal Reserve Chair Jerome Powell warned rates might be raised faster than expected to cool stubbornly high inflation.

    Adding to the rout was SVB Financial Group, which lost 60% of its value Thursday after announcing plans to raise up to $1.75 billion to strengthen its financial position amid concerns about higher interest rates and the economy. The SVB news dragged Bank of America, Citigroup and others along with it, though they had stabilized by premarket Friday.

    SVB shares continued to slide in off-hours trading, falling another 62% before the bell.

    Traders looked ahead to U.S. government hiring data due out Friday after other indicators showed the job market has stayed strong despite repeated interest rate hikes. That is good for workers, but Fed officials worry rising wages might fuel inflation. That might lead to more rate hikes to dampen business activity and hiring.

    Analysts surveyed by FactSet are forecasting that the U.S. economy added 215,000 jobs in February.

    Fed officials are “clearly messaging that rates will move higher,” Rubeela Farooqi of High Frequency Economics said in a report.

    Powell said earlier in the week the Fed was ready to impose more big rate hikes if necessary. That added to fears the Fed and other central banks might push the global economy into at least a brief recession to extinguish inflation.

    A government report on Thursday showed the number of Americans applying for unemployment benefits last week jumped by the most in five months but layoffs are low.

    Yields on the two-year Treasury, which tends to track expectations for future Fed action, eased to 4.87% from about 5.05% just before the unemployment report’s release. It had been hovering at its highest level in 16 years.

    A report Wednesday showed the number of job openings advertised across the country last month was higher than economists expected.

    Traders expect the Fed to raise its benchmark lending rate by an unusually large margin of 0.5 percentage points at its March 22 meeting. That is up from an expectation of 0.25 points before Powell’s comments this week, according to CME Group.

    U.S. inflation edged up to 5.4% in January, well above the Fed target of 2%. The central bank has already raised its key rate to a range of 4.50% to 4.75%, up from close to zero at the start of 2022, its fastest set of hikes in decades.

    Companies have been cautious about their prospects in 2023. Economists expect profits to fall through the first half of the year.

    In European trading, the FTSE 100 in London fell 1.7% at midday, Frankfurt’s DAX tumbled 1.3% and he CAC 40 in Paris fell 1.1%.

    In Asia, the Shanghai Composite Index fell 1.4% to 3,230.07 and the Nikkei 225 in Tokyo tumbled 1.7% to 28,143.97. The Hang Seng in Hong Kong slid 3% to 19,319.92.

    The Kospi in Seoul gave up 1% to 2,394.59 and Sydney’s S&P-ASX 200 lost 2.3% to 7,144.70.

    India’s Sensex declined 1.2% to 59,085.70. New Zealand and Southeast Asian markets declined.

    In energy markets, benchmark U.S. crude lost 63 cents to $75.09 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 94 cents the previous session to $75.72. Brent crude, the price basis for international oil trading, declined 52 cents to $81.07 per barrel in London. It sank $1.07 the previous session to $81.59.

    The dollar gained to 136.70 yen from Thursday’s 136.17 yen. The euro rose to $1.0588 from $1.0578.

    On Thursday, the S&P 500 fell 1.9%, further eroding this year’s gains. Some 95% of companies in the benchmark index declined.

    The Dow lost 1.7% and the Nasdaq composite sank 2.1%.

    ——

    McDonald reported from Beijing; Ott reported from Silver Spring, Maryland.

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  • Global stocks, Wall St. futures sink ahead of US jobs update

    Global stocks, Wall St. futures sink ahead of US jobs update

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    BEIJING — Global stock markets and Wall Street futures fell Friday ahead of a U.S. job market update amid unease about possible further interest rate hikes.

    Markets in London, Shanghai, Frankfurt and Tokyo declined. Oil prices were lower.

    Wall Street’s benchmark S&P 500 index fell Thursday by its biggest one-day margin this year after Federal Reserve Chair Jerome Powell warned rates might be raised faster than expected to cool stubbornly high inflation.

    Traders looked ahead to U.S. government hiring data due out Friday after other indicators showed the job market has stayed strong despite repeated interest rate hikes. That is good for workers, but Fed officials worry rising wages might fuel inflation. That might lead to more rate hikes to dampen business activity and hiring.

    Fed officials are “clearly messaging that rates will move higher,” Rubeela Farooqi of High Frequency Economics said in a report.

    In early trading, the FTSE 100 in London fell 1.5% to 7,760.88 and Frankfurt’s DAX tumbled 1.9% to 15,329.28. The CAC 40 in Paris fell 1.9% to 7,177.35.

    On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were down 0.7%.

    On Thursday, the S&P 500 fell 1.9%, further eroding this year’s gains. Some 95% of companies in the benchmark index declined.

    The Dow lost 1.7% and the Nasdaq composite sank 2.1%.

    SVB Financial Group lost 60% of its value after announcing plans to raise up to $1.75 billion to strengthen its financial position amid concerns about higher interest rates and the economy. Bank of America, Citigroup and other big banks fell sharply.

    In Asia, the Shanghai Composite Index fell 1.4% to 3,230.07 and the Nikkei 225 in Tokyo tumbled 1.7% to 28,143.97. The Hang Seng in Hong Kong slid 3% to 19,319.92.

    The Kospi in Seoul gave up 1% to 2,394.59 and Sydney’s S&P-ASX 200 lost 2.3% to 7,144.70.

    India’s Sensex declined 1.2% to 59,085.70. New Zealand and Southeast Asian markets declined.

    Powell said earlier in the week the Fed was ready to impose more big rate hikes if necessary. That added to fears the Fed and other central banks might push the global economy into at least a brief recession to extinguish inflation.

    A government report on Thursday showed the number of Americans applying for unemployment benefits last week jumped by the most in five months but layoffs are low.

    Yields on the two-year Treasury, which tends to track expectations for future Fed action, eased to 4.87% from about 5.05% just before the unemployment report’s release. It had been hovering at its highest level in 16 years.

    A report Wednesday showed the number of job openings advertised across the country last month was higher than economists expected.

    Traders expect the Fed to raise its benchmark lending rate by an unusually large margin of 0.5 percentage points at its March 22 meeting. That is up from an expectation of 0.25 points before Powell’s comments this week, according to CME Group.

    U.S. inflation edged up to 5.4% in January, well above the Fed target of 2%. The central bank has already raised its key rate to a range of 4.50% to 4.75%, up from close to zero at the start of 2022, its fastest set of hikes in decades.

    Companies have been cautious about their prospects in 2023. Economists expect profits to fall through the first half.

    In energy markets, benchmark U.S. crude lost 80 cents to $74.92 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 94 cents the previous session to $75.72. Brent crude, the price basis for international oil trading, declined 64 cents to $80.95 per barrel in London. It sank $1.07 the previous session to $81.59.

    The dollar gained to 136.39 yen from Thursday’s 136.17 yen. The euro rose to $1.0587 from $1.0578.

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  • Asian stocks mixed after Wall St steadies amid rate fears

    Asian stocks mixed after Wall St steadies amid rate fears

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    BEIJING — Asian stock markets were mixed Thursday after Wall Street steadied following a plunge on worries about more U.S. interest rate hikes.

    Shanghai and Seoul declined. Tokyo and Hong Kong advanced. Oil prices edged lower.

    Wall Street’s benchmark S&P 500 index recovered some of the previous day’s loss following Federal Reserve chair Jerome Powell’s warning that rate hikes might speed up because upward pressure on prices is stronger than expected.

    Investors worry the Fed and other central banks look increasingly likely to tip the global economy into at least a brief recession to extinguish stubborn inflation. U.S. inflation edged up in January to 5.4%, well above the Fed’s target of 2%.

    “The risks of a higher and faster hike trajectory have risen,” Stephen Innes of SPI Asset Management said in a report. He said the Fed might be motivated by “mounting criticism” that it has “fallen behind the inflation curve.”

    The Shanghai Composite Index lost 0.2% to 3,277.13 after Chinese inflation decelerated in February to 1% over a year earlier from the previous month’s 2.5%. The Hang Seng in Hong Kong advanced 0.3% to 20,110.28.

    The Nikkei 225 in Tokyo gained 0.6% to 28,616.03 after the government cut its estimate of economic growth in the three months ending in December to 0.1% from a previous estimate of 0.6%.

    The Kospi sank 0.4% to 2,422.31 and Sydney’s S&P-ASX 200 was up less than 0.1% at 7,311.10.

    India’s Sensex opened down 0.2% at 60,197.90. New Zealand and Singapore declined while Jakarta and Bangkok rose.

    On Wall Street, the S&P 500 rose 0.1% on Wednesday to 3,992.01.

    The Dow Jones Industrial Average fell 58.06, or 0.2%, to 32,798.40, while the Nasdaq composite added 45.67, or 0.4%, to 11,576.00.

    Powell said Fed policymakers want to see more data before deciding on future rate hikes.

    A report Wednesday showed the number of job openings advertised across the country last month was higher than expected. Traders scrutinize such data for clues about wages, one factor the Fed looks at in trying to forecast inflation.

    The report also showed some signs of easing pressure, including fewer Americans quitting their jobs.

    A separate report Wednesday suggested hiring is still stronger across U.S. private employers than expected.

    The U.S. government’s more comprehensive monthly report on hiring is due out Friday.

    Other data showed strong U.S. consumer spending, another factor policymakers worry might push up prices.

    Expectations for a firmer Fed have been most clear in the bond market, where yields have shot higher.

    The yield on the 10-year Treasury, or the difference between its market price and the payout at maturity, ticked up to 3.98% from 3.97% late Tuesday.

    The yield on the two-year Treasury rose to 5.05% from 5.02%. It’s near its highest level since 2007.

    Yields on shorter-term Treasurys are above those for Treasurys that pay off further in the future. Wall Street sees that as a fairly reliable indicator of an impending recession.

    In energy markets, benchmark U.S. crude gained 4 cents to $76.70 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 92 cents on Wednesday to $76.66. Brent crude, the price basis for international oil trading, added 4 cents to $82.70 per barrel in London. It retreated 63 cents the previous session to $82.66.

    The dollar declined to 136.81 yen from Wednesday’s 137.24 yen. The euro gained to $1.0554 from $1.0545.

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  • Asian stocks tumble amid fears about faster rate hikes

    Asian stocks tumble amid fears about faster rate hikes

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    TOKYO — Asian shares were mostly lower Wednesday as investors fretted that the Federal Reserve might raise interest rates faster if pressure stays high on inflation.

    Japan’s benchmark Nikkei 225 edged up 0.5% to finish at 28,444.19. Australia’s S&P/ASX 200 slipped 0.8% to 7,307.80. South Korea’s Kospi dropped 1.3% to 2,430.93.

    Chinese shares sank after officials in Beijing announced plans for a regulatory shakeup. Hong Kong’s Hang Seng tumbled 2.6% to 20,005.12, while the Shanghai Composite shed 0.6% to 3,266.65.

    Wall Street shuddered Tuesday after Fed Chairman Jerome Powell told lawmakers that the central bank would keep interest rates higher if need be to fight inflation.

    “Asian shares were under pressure on Wednesday as global equities sold off after hawkish comments from Fed Chair Powell. He noted recent macro data, while possibly related to seasonal adjustments, suggest the Committee might have to raise rates higher than expected,” said Anderson Alves at ActivTrades.

    A Fed meeting later this month is expected to result in another rate hike. When Powell speaks at U.S. Congress again later in the day, traders will watch to see if he reinforces the hawkish rhetoric or tones it down, given the market reaction.

    Wall Street declined as angst over the Fed raised worries about a possible recession down the line. The S&P 500 dropped 1.5% for one of its worst days of the year so far, closing at 3,986.37. The Dow Jones Industrial Average lost 1.7% to 32,856.46, and the Nasdaq sank 1.3% to 11,530.33.

    Inflation and what the Fed is doing about it have been at the center of Wall Street’s sharp swings this year. After seeming to be on a steady decline since last summer, reports on inflation last month came in surprisingly hot. So did a suite of other data on the economy.

    That raised fears that inflation is staying stickier than feared and that the Fed will have to raise rates higher than earlier thought. Higher rates can drag down inflation because they slow the economy, but they hurt prices for stocks and other investments. They also raise the risk of a recession later on.

    Powell has confirmed some of those fears, saying the data mean “the ultimate level of interest rates is likely to be higher than previously anticipated.” He also said in his testimony to a Senate committee that the Fed is ready to increase the pace of its hikes again if needed.

    That would be a sharp turnaround after it had just slowed its pace of increases to 0.25 percentage points last month from earlier hikes of 0.50 and 0.75 points.

    “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said. “Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.”

    After sitting at virtually unchanged levels just before Powell’s testimony, stocks fell immediately afterward.

    “This is the market coming back to realistic expectations,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. ”I think it’s going to continue to wash out some of the excesses in the market.”

    Wall Street has largely abandoned hopes that percolated early this year for a possible cut to interest rates later in 2023. It also upped its forecast for how high the Fed will ultimately take rates before pausing.

    That’s been most clear in the bond market, where the yield on the 10-year Treasury topped 4% last week and hit its highest level since November. It helps set rates for mortgages and other important loans.

    Early Wednesday it was at 4%.

    The two-year Treasury yield, which moves more on expectations for the Fed, shot up to 5.01% from 4.87% and is at its highest level since 2007.

    The U.S. government’s monthly jobs report, due Friday, will provide an update on wages. The Fed’s fear is that too-strong gains could push prices higher.

    The challenge for the market has been that the economy has actually been too strong, despite all the rate increases the Fed has thrown at it. That suggests a recession may not be looming but also likely means rates will need to stay higher for longer, raising risks of a deeper recession down the line.

    In energy trading, benchmark U.S. crude lost 10 cents to $77.48 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 6 cents to $83.35 a barrel.

    In currency trading, the U.S. dollar rose to 137.72 Japanese yen from 137.07 yen. The euro cost $1.0537, down from $1.0551.

    ___

    AP Business Writer Stan Choe contributed.

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