Asian Pacific indices down on banking jitters

US stock indices fell across the board yesterday. The banking sector took a hit, with the smaller, regional banks worst affected. Concerns over lenders have been growing recently, particularly following the recent bankruptcies of two large companies linked to the auto sector, First Brands and Tricolor Holdings. The former has led to steep losses for the company’s lenders, particularly those involved in private credit. It’s also alleged that there’s close to $3 billion missing from the accounts.

As far as the latter is concerned, JP Morgan is understood to have written off $170 million in bad loans to the company. This led CEO Jamie Dimon to comment that when you see one cockroach, then there’s probably more. And it appears there are. On Wednesday, Zions Bancorp said loans to a couple of borrowers had gone bad, leading to a significant charge. And yesterday, Western Alliance accused a major borrower of fraud.

The stock prices of both banks were hit hard. The sell-off has spread to larger financial institutions as well, with JPMorgan now down over 5% since it released a good set of third quarter earnings on Tuesday. And the broader market is also taking some heat, as it seems this has been the catalyst for investors to cut their exposure.

As an example, NVIDIA has fallen close to 10% since hitting an all-time high this time last week. The domestically focused Russell 2000 led the losses, ending yesterday’s session down 2.1%. Regional banks are a major sector within the index.

The Dow fell 0.7%, while the S&P and NASDAQ ended down 0.6% and 0.5% respectively. The sell-off continued overnight, with US stock index futures down around 1% each. The SPDR S&P Regional Banking ETF is now down over 8% since Tuesday’s close. This heightened stress across markets has seen the Volatility Index (VIX) rise sharply to hit its highest levels since the end of April.

Source: TN Trader

Investors are now looking ahead to the weekend, worried that there may be further bad loan revelations. US Treasury yields are down sharply as investors hoover up bonds on a flight to safety. All this comes amid ongoing trade tensions, stretched valuations due to the AI-driven rally, along with the extended US government shutdown. But it’s also worth considering that the banking sell-off may be overdone.

It’s possible that these are all isolated incidents which are completely unconnected, other than the timing of the banks fessing up to them. Then again, a few analysts have been warning about a lack of transparency across private credit and private equity for a while now. So, there’s certainly a danger that there could be more bad news to come.

European stock indices were all sharply lower on Friday, echoing the negative tone across US and Asian Pacific markets. European indices, particularly the French CAC, had a strong start to the week, recovering from last Friday’s sharp sell-off after President Trump threatened fresh 100% tariffs on US imports of Chinese goods. This was his initial response to the announcement that China was restricting exports of critical minerals, over which it holds a near monopoly.

Source: TN Trader

This spat is ongoing, although Presidents Trump and Xi Jinping are still expected to meet at the end of this month, prior to the Trump administration's 1st November tariff deadline for China. The outperformance of the French CAC came as the current Prime Minister, Sebastien Lecornu, pledged to suspend the government’s pension reform until after the 2027 election. This helped to bring the socialists onside, which then led to M. Lecornu surviving two ‘no confidence’ votes yesterday, thereby shoring up the government.

Investors are keeping a close eye on geopolitical headlines. Among these, US President Donald Trump and Russian President Vladimir Putin plan to meet in Hungary to discuss the war in Ukraine.

Meanwhile, delegates at the IMF and World Bank annual meetings continued to debate the global economic outlook, and Eurozone Core CPI ticked up to 2.4% from 2.3% year-on-year. Headline CPI, which includes food and energy, was unchanged at 2.2%.

The main feature across Forex this morning has been the continued buying of haven currencies such as the Swiss franc and Japanese yen. This has helped the USD/JPY to fall back towards the top of a range which had been building since the summer.

Despite this, there’s still a large gap to fill on the chart from earlier this month. The yen slumped following the unexpected election of Ms Sanae Takaichi as the leader of Japan’s ruling LDP party. Ms Takaichi is known to be against further rate hikes; she views a loose monetary policy as vital to stimulate much-needed economic growth.

Otherwise, the US dollar was little changed in early trade. The Dollar Index fell sharply yesterday and is now back below 98.00, having traded above 99.00 on Tuesday. This 99.00 level is building as an area of resistance. If the dollar is going to continue to recover after a dismal first nine months of this year, it needs to take out 99.00 with some conviction first.

Source: TN Trader

Gold’s powerful rally appears to have run into a bit of resistance this morning. Yesterday, gold extended its gains and pushed further into record territory as it approached $4,400. It drew support from persistent safe-haven demand as investors sought protection from turbulence across equities due to banking concerns and a surge in stock market volatility.

Gold’s rally has been remarkable, fuelled by a combination of fear-driven buying and a weakening US dollar. The move higher started as less-established central banks began to increase their bullion purchases. But it went on to attract attention from a wider range of investors, with traders increasingly eyeing higher price targets while acknowledging that a sharp pullback could follow once momentum finally fades. The daily MACD continues to push into very overbought territory.

Source: TN Trader

After an initial pullback, silver surged to a fresh all-time high yesterday of $54.60 per ounce. It has pulled back a touch this morning but remains within sight of its record high. There’s been plenty of buying interest, particularly when silver broke above $40 at the beginning of September. But, as with gold, the daily MACD continues to look very overbought.

Source: TN Trader

Crude oil extended its decline this morning in a move which saw front-month WTI hit its lowest level since early May, around $56.20 per barrel. Yet again, investors continue to react to data that indicates ample supply, while forecasts point to waning demand growth.

Despite recent attempts to stabilise, crude has struggled to find decent support. Sellers come in to counter any attempt at a bounce. The tone remains negative, and the bears have got the double-bottom low around $55 from the spring this year firmly in their sights. This is supported by the MACD, which shows that momentum is pointing downwards. Yet at some time, the selling will dry up. Once this happens, then that opens the possibility of a sharp snapback in prices.

Source: TN Trader

Natural gas prices steadied in early trade, having dropped sharply over the past nine days. The move lower came amid a broader slide in commodities, with bearish momentum accelerating as downside pressure built across the energy complex.

Traders are now watching to see whether natural gas can now consolidate, or if the decline gains further traction. The overall picture remains one of softness, reinforcing the cautious stance already dominating across global markets.

Digital assets suffered from the risk-off sentiment sweeping through broader markets. Bitcoin slumped below support around $110,000 and fell back further towards $103,000, hitting its lowest level since late June.

Ether crashed below $4,000. The weakness highlighted how closely crypto is tied to shifts in global risk appetite. Downside momentum has accelerated for both cryptos amid nervous trading conditions.

Some observers have suggested that Bitcoin and Ether could act as alternatives to gold, behaving as safe-havens in a risk-off environment. But cryptos are behaving like other risk assets, such as tech stocks.

Markets are showing clear signs of strain, with regional banking concerns boosting volatility and eroding confidence. The spike in the VIX signals a reawakening of fear, while the dollar’s slide and gold’s relentless rally reflect the growing preference for safety.

Earnings season continues to deliver decent results, but sentiment remains fragile as the US government shutdown drags on. Oil’s slump, gas weakness, and crypto’s retreat all underline a market searching for stability. For now, it appears the bears have regained the upper hand, with traders wary that something deeper may be unfolding beneath the surface.