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Nikkei falls 1.8% as banking shares slide

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Gold claims new record, set for biggest weekly rise since

2008

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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 on more policy

easing

(Adds European open, updates prices)

By Stella Qiu

SYDNEY, Oct 17 (Reuters) -

Asian shares slid, Treasuries extended gains and gold hit a

new high on Friday as signs of credit stress at U.S. regional

banks unnerved investors and had markets baying for more Federal

Reserve policy easing.

European stocks looked set for a sharp fall at the open,

with EURO STOXX 50 futures down 1% and FTSE futures

1.1% lower. Both S&P 500 futures and Nasdaq

futures lost 0.6% ahead of more earnings from U.S.

regional banks later in the day.

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, referring

to a series of bank failures that year which prompted the Fed to

take extraordinary steps to stabilise the financial system.

The developments pummelled U.S. banking stocks and

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

Swiss franc.

Safe-haven Treasuries rallied further, with two-year yields

down 3 basis points on Friday to a fresh three-year

low of 3.3890% 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

$4,378.69 per ounce. Bullion is set for a weekly gain of 8.5%,

its biggest since September 2008 when the collapse of Lehman

Brothers fuelled the global financial crisis.

Silver also hit a new peak.

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 1%, taking the week to negative

territory. Japan's Nikkei lost 1.5% as its banking index

tumbled.

Taiwan shares fell 1.1% even after chipmaker TSMC

posted a record quarterly profit and issued a rosy

forecast for spending on artificial intelligence.

Chinese blue chips dropped 1.5% and Hong Kong's

Hang Seng tumbled 1.8%.

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

dollar, which slipped 0.2% on Friday to 98.10 against its major

peers. It was on track for a weekly loss of 0.8%.

The yen and the Swiss franc gained most, up

0.9% and 1.2% 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.

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 0.4% to $57.25 a barrel, while Brent

was also off 0.3% to $60.87.

(Editing by Edwina Gibbs anda Kim Coghill)