World Shares Fall on Banking Turmoil, Recession Worries

BANGKOK (AP) -- Shares fell Friday in Europe and Asia as worries over turmoil in the banking sector and recession risks overshadowed gains on Wall Street.

Benchmarks declined in most major markets, while U.S. futures were higher. Oil prices fell.

Investors are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

Germany's DAX lost 1% to 15,055.96 and the CAC 40 in Paris also fell 1%, to 7,065.83. Britain's FTSE 100 declined 1.1% to 7,418.52. The future for the S&P 500 was up 0.1% while that for the Dow industrials was unchanged.

Regional banks' shares in Asia were modestly lower Friday, with HSBC Holdings plc losing 2.9% in Hong Kong while mid-sized Japanese bank Resona Holdings declined 2.6%.

Shares in Japanese energy and electronics company Toshiba Corp. gained 4.2% after it announced late Thursday that it had accepted a $15 billion tender offer from a buyout fund made up of the nation's major banks and companies. If regulators approve it, the proposed buyout by private equity firm Japan Industrial Partners would be a major step in troubled Toshiba's yearslong turnaround effort, allowing it to go private.

Japan reported that its inflation rate fell to 3.3% in February from 4.3% the month before, though core inflation excluding fresh food and energy costs rose to 3.5% from 3.2%. The data suggest persisting pressure on the Bank of Japan to adjust its below zero interest rate policy, though economists said they expect price pressures to abate in coming months.

"Given the recent market turmoil surrounding the banking sector," ING economists said, "the BOJ's move will likely be well communicated with the market before it substantially changes its policy."

Tokyo's Nikkei 225 index lost 0.1% to 27,385.25 and the Kospi in Seoul gave up 0.4% to 2,414.96. Hong Kong's Hang Seng slipped 0.7% to 19,915.68 and the Shanghai Composite index sank 0.6% to 3,265.65.

Australia's S&P/ASX 200 shed 0.2% to 6,955.20. Shares fell in Mumbai but rose in Bangkok and Taiwan.

On Thursday, the S&P 500 added 0.3% for its third gain in four days while the Dow Jones Industrial Average gained 0.2%. The Nasdaq composite held up better thanks to strength in technology shares, gaining 1%.

Stocks fell sharply the day before after the Federal Reserve indicated that while the end may be near for its hikes to interest rates, it still doesn't expect to cut rates this year. Fed Chair Jerome Powell also insisted the Fed could keep raising rates if inflation stays high.

Markets were also still mulling comments from Treasury Secretary Janet Yellen, who said the government is not considering blanket protections for all customers at all banks. She did say the government will make all depositors whole at banks, on a case-by-case basis, if failing to do so would pose a risk for the broader system.

Implicit in that is perhaps the hint that any bank failure could be seen as such a systemic risk. Failures at both Silicon Valley Bank and Signature Bank met that criteria. Depositors were promised all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank fell 6% after giving up a gain of nearly 10%.

In other trading Friday, U.S. benchmark crude oil slipped 67 cents to $69.29 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 94 cents to $69.96 per barrel.

Brent crude, the pricing basis for international oil, lost 69 cents to $74.81 per barrel.

The U.S. dollar fell to 130.00 yen from 130.83 yen. The euro slipped to $1.0774 from $1.0833.