Asia Stocks Sink Amid Banking Crisis, Investors Turn To Gold

As Credit Suisse became the latest focal point for fears of a banking crisis, Asian stocks fell on Thursday (Mar 16), sending investors to the safety of gold, bonds, and the US dollar, markets were on edge ahead of a European Central Bank (ECB) meeting later in the day.

Credit Suisse's announcement that it will exercise an option to borrow up to 50 billion Swiss francs (US$54 billion) from Switzerland's central bank alleviated some of the most serious concerns, providing a floor for bank shares and a boost to Europe futures.

However, sentiment was shaky, and markets were tense. MSCI's Asia-Pacific equity index outside Japan fell to 2023 lows and was down 0.9% mid-morning. The Nikkei 225 index in Japan fell 1.3%.

"I believe we're back in hard hat territory," said Damian Rooney, a dealer at Perth stockbroker Argonaut.

"The word contagion is circulating... we're getting fear all over the place here."

Credit Suisse stock fell as much as 30% to a record low overnight, while the Swiss franc fell the most against the US dollar in seven years.

Insurers, banks, miners, and consumer-exposed stocks led the losses across Asia, as fears mount that a potential credit crunch will exacerbate a looming economic slowdown.

However, sentiment was shaky, and markets were tense. MSCI's Asia-Pacific equity index outside Japan fell to 2023 lows and was down 0.9% mid-morning. The Nikkei 225 index in Japan fell 1.3%.

"I believe we're back in hard hat territory," said Damian Rooney, a dealer at Perth stockbroker Argonaut.

"The word contagion is circulating... we're getting fear all over the place here."

Credit Suisse stock fell as much as 30% to a record low overnight, while the Swiss franc fell the most against the US dollar in seven years.

Insurers, banks, miners, and consumer-exposed stocks led the losses across Asia, as fears mount that a potential credit crunch will exacerbate a looming economic slowdown.

The latest pressure came in the aftermath of the failure of three US banks in less than a week, and it was triggered after the bank stated that it had not stopped deposit outflows and its largest shareholder declined to provide additional support.

According to the Telegraph newspaper on Wednesday, the Bank of England was holding emergency talks with international counterparts. The Bank of England did not respond.

Expectations for a 50 basis point rate hike in Europe have also dwindled as markets rethink the global interest rate outlook in light of banking concerns.

Money market pricing implied a less than 20% chance of an ECB rate hike of 50 basis points, down from 90% the day before.

Bonds have risen sharply, with two-year US Treasury yields falling to their lowest level since September last year at 3.72 percent overnight. They last paid 3.97 percent.

In Asia, benchmark 10-year yields fell overnight and remained at 3.492 percent.

Following steep overnight drops, the euro and Swiss franc found some support from news of the central bank's assistance to Credit Suisse.

The euro was last worth US$1.0589 and the franc was worth 0.9309 to the dollar. The flight to safety boosted the yen, which rose 0.5% to 132.83 per dollar.