European and Asian equities tumbled at the open on Friday as fears over the health of banks’ bond portfolios compounded investors’ nervousness ahead of the publication of key US economic data.
The moves followed a steep sell-off on Wall Street on Thursday as investors were spooked by difficulties at Silicon Valley Bank, a technology-focused lender.to shore up its balance sheet. The losses have raised concerns about the potential risks in the large portfolios of bonds held by US banks, which invested deposits into long-dated securities such as Treasuries at the height of the pandemic. The sharp rise in interest rates over the past year has squeezed industry profitability.
Investors’ nerves have also been tested by comments from the Fed that it would be prepared to reaccelerate the pace of interest rate increases if the US economy and inflation do not cool. Traders were looking ahead to the crucial monthly non-farm payrolls and unemployment data on Friday, to see if the economy showed signs of cooling.
Dickie Wong, executive director of research at Kingston Securities in Hong Kong, said worse than expected earnings from JD.com, the Chinese ecommerce company which on Thursday said that its revenue growth had slowed at the end of last year, also led to a sell-off in parts of the tech sector in Hong Kong.