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Nikkei falls 1% as banking shares slide

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Gold claims new record but gains faded a little

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Oil hits new five-month lows as Trump, Putin summit looms

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Treasuries up for 3rd week as investors bet more policy

easing

By Stella Qiu

SYDNEY, Oct 17 (Reuters) - Asian shares tracked Wall

Street lower, bonds extended gains and gold hit a fresh record

on Friday, with signs of credit stress at U.S. regional banks

putting investors on edge.

Overnight, Zions sank 13% after disclosing it would

take a $50 million loss in the third quarter on two loans from

its California division. Western Alliance's stock

slumped 11% after it initiated a lawsuit alleging fraud by

Cantor Group V, LLC.

"While the recent issues of the two lenders seems well

contained, where there is smoke there is often fire and the

remedy of the 2023 crisis has created a tinderbox for another

banking flare-up," said Tony Sycamore, analyst at IG.

The two developments pummelled U.S. banking stocks and

weighed on the U.S. dollar to the benefit of the yen and the

Swiss franc. Two-year Treasury yields hit a fresh

three-year trough of 3.4040% on Friday as investors priced in at

least two more quarter-point rate cuts from the Federal Reserve

this year.

The flight to safety saw gold hit a record of

$4,378 per ounce, although it ran into some profit-taking and

was last flat. Even so, the bullion is set for a weekly gain of

7.6%, its biggest since early 2020. Silver also hit a new

peak.

Both S&P 500 futures and Nasdaq futures lost

0.3% ahead of more earnings from U.S. regional banks later in

the day. European stock futures fell 0.7%, while FTSE

futures dropped 0.9%.

Sentiment in equities has also taken a hit due to rising

trade tensions between China and the United States. China on

Thursday accused the U.S. of stoking panic over its rare earth

controls, rejecting a White House call to roll back the curbs.

MSCI's broadest index of Asia-Pacific shares outside Japan

dropped 0.9%, taking the week to negative

territory. Japan's Nikkei lost 1% as its banking index

tumbled.

Taiwan's shares fell 0.9% even after chipmaker TSMC

posted a record quarterly profit and issued a rosy

forecast for spending on artificial intelligence.

Both Chinese blue chips and Hong Kong's Hang Seng

tumbled 1.4%.

The credit worries and rate cut bets undermined the U.S.

dollar, which was on track for a weekly loss of 0.6% against its

major peers to 98.24, the lowest in ten days.

The yen and the Swiss franc gained most, up

0.7% and 0.9% for the week.

Bank of Japan Governor Kazuo Ueda said that the central

bank would scrutinise various data in deciding whether or not to

raise interest rates this month.

Liberal Democratic Party (LDP) leader Sanae Takaichi is

still wooing allies to help clinch a prime ministerial vote

expected next week.

Treasuries are set for a third straight week of gains.

Two-year Treasury yields slipped 2 basis points on

Friday to 3.4040%, a fresh three-year low, and were headed for a

third straight week of declines.

Ten-year Treasury yields also eased 2 bps to

3.959% and were down 10 bps for the week.

Oil prices extended losses, after falling 1% overnight as

U.S. President Donald Trump said he and Russian President

Vladimir Putin agreed to meet in Hungary soon to discuss ending

the war in Ukraine.

U.S. crude fell 0.7% to $57.04 a barrel, while Brent

was also off 0.7% to $60.63.

(Editing by Edwina Gibbs)