Resona Holdings led losses among Japan’s big lenders on Tuesday, with its stock falling 3.6% as investors reacted to remarks from Bank of America that unsettled trading and banking sector sentiment.
Overnight, Bank of America Chief Executive Brian Moynihan told investors the firm expects third-quarter sales and trading revenue to be roughly flat compared with a year earlier, and he flagged a decline in the bank’s investment banking fees. Those comments fed worries that weakness at BofA could be mirrored across the broader banking and trading complex, prompting widespread selling on Wall Street and spilling over into other markets.
Japanese banks tracked the move lower in the United States, and the sector’s cautious tone was compounded by an approaching Bank of Japan two-day policy meeting set to conclude September 17-18. Market pricing ahead of that meeting has largely converged on a near-certain 25 basis point rate increase to 1.25%.
At the same time, the U.S. Federal Reserve is holding its own September meeting in the same week - the first occasion in this tightening cycle that both central banks are issuing decisions within the same seven-day window. That simultaneity is compressing the interest rate spread between the yen and the dollar and amplifying concerns of a forced unwinding of carry trades that rely on the differential.
Market moves were reflected across several indicators on Tuesday. U.S. dollar to Japanese yen was up 0.34% as traders adjusted positions in FX markets. The Nikkei 225 pared earlier gains and was trading roughly flat by the middle of the session. Bank of America shares were also weaker, with the stock down in the session, while Resona’s listed code showed a mid-session decline in the high single digits percentage-wise relative to its prior close.
Investors and market participants remain attentive to both central bank outcomes and follow-through in trading revenue for major banks, factors that are likely to continue shaping sector performance in the near term.