Asian Stocks on the Low, Bonds Soar

Falling bank stocks drove Asian markets lower on Friday, while bonds rallied and expectations for interest rate hikes in the United States were reduced after a surprise capital raise at a Silicon Valley startup lender sparked fears of wider banking-system stress.

The yen fell and Japanese government bond yields fell after the Bank of Japan kept stimulus levels unchanged at Governor Haruhiko Kuroda's final meeting in charge, as expected.

The benchmark 10-year JGB yield, which the BOJ sets at 50 basis points either side of zero, has recently fallen sharply from that level to 0.445 percent. The yen was last down about 0.4 percent at 136.615 per dollar, following a 0.6 percent drop.

Japan's Nikkei ended the day down around 1%, compared to a 1.23 percent loss prior to the central bank decision.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.8% to a two-month low, led by banks and Hong Kong technology stocks.

The S&P 500 futures were down 0.57 percent after the cash index fell 1.8% and fell below its 200-day moving average.

In Tokyo trading, the US dollar edged higher, and short-end Treasuries extended overnight gains, driving two-year yields down another 12 basis points to 4.7837 percent.

Fed funds futures also rose sharply, lowering the market-implied peak in US rates from above 5.6 percent to just below 5.5 percent, and pricing in a 50 basis point Fed hike this month, down from more than 70% a day earlier.

SVB Financial Group, the parent company of startup lender Silicon Valley Bank, reported higher-than-expected "cash burn" from clients, falling deposits, and rising capital costs. It announced an equity sale just hours after crypto-focused lender Silvergate announced its closure.

SVB stock was still sliding after the bell and has lost about 70 per cent of its value in 24 hours. Shares of big banks were dragged down with it, with J.P. Morgan Chase & Co losing 5.4 per cent, Citigroup down 4.1 per cent and big lenders in Asia and Australia on the slide - albeit to a lesser extent - on Friday morning.

"I think there's speculation that there are wider problems within the U.S. banking system, or there's that potential, and that's caused a re-think of Fed policy," said ING economist Rob Carnell in Singapore.

"The thinking is that if what the Fed's doing is causing this distress, then perhaps they won't be doing that much more," he said.

"But it's a big move on the back of what seems to be some fairly woolly speculation...which just shows how antsy the markets are right now, and this has spilled into all the other markets."

Surprisingly high U.S. jobless claims have provided a shaky backdrop for broader U.S. employment data due later this week, putting some pressure on recent dollar gains.

The figures are a critical barometer of the health of the U.S. labour market and the direction of interest rates, after Fed Chair Jerome Powell warned that rates could rise further and faster if data shows that is necessary to control inflation.

Bitcoin was trading just above the psychological $20,000 level, as the fallout from Silvergate's demise weighed on the broader mood in digital assets.

Brent crude futures fell to $81.19 per barrel, while gold remained unchanged at $1,830 per ounce.