After a months-long run-up that has seen some indexes hit multiple records, investors have been sent reeling this week since US President Donald Trump stoked his tariff standoff with China on Friday, sparking tit-for-tat salvos that have broken the calm.

Investors have been nervously watching the US banking sector since parts company First Brands and subprime lender Tricolor filed for bankruptcy in September, with the former owing billions to lenders.

The announcement was followed this week by news that Zions Bancorp had a $50 million charge-off tied to commercial loans from its California arm, while Western Alliance said a borrower failed to deliver the promised collateral.

The news sent mid-sized banking shares tumbling and fanned out to the rest of Wall Street, with the all three main indexes down.

The VIX Volatility index -- a closely watched benchmark of investor anxiety -- hitting its highest level since May, while safe-haven gold set another record of $4,379.93. Silver also hit a new peak.

Thursday's developments dealt another blow to the optimism that had pushed markets higher this year, with investors already fretting that valuations -- particularly among tech firms -- are overdone and possibly in an AI-fuelled bubble that could soon pop.

"The volatility in regional banks, combined with the recent collapse of subprime lender Tricolor Holdings, has investors questioning the broader health of US credit markets," said National Australia Bank's Rodrigo Catril.

The losses in New York were matched in Asia, where Hong Kong, Tokyo, Shanghai, Singapore, Sydney, Wellington, Taipei and Manila were all well in the red.

Investors were also still on tenterhooks after Washington and Beijing exchanged salvos this week on trade and shipping, after Trump's warning Friday that he would hit China with 100 percent tariffs over its rare earth export controls.

Meanwhile, lawmakers in Washington are still no closer to ending a shutdown that has caused the closure of government departments and delayed the release of key data used by the Federal Reserve to decide on policy.

Still, traders have been given some support by expectations the central bank will cut interest rates at least once more this year, though even that was based on a string of reports showing the US jobs market deteriorating.

Crude prices extended losses on worries about China-US tensions, with selling also coming from news that Trump will meet Russian counterpart Vladimir Putin to discuss ending the conflict in Ukraine.

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 47,827.31 (break)

Hong Kong - Hang Seng Index: DOWN 1.5 percent at 25,500.99

Shanghai - Composite: DOWN 1.0 percent at 3,878.21

Euro/dollar: UP $1.1706 from $1.1692 on Thursday

Pound/dollar: UP at $1.3442 from $1.3436

Dollar/yen: DOWN at 150.16 yen from 150.35 yen

Euro/pound: UP at 87.08 percent from 87.02 pence

West Texas Intermediate: DOWN 0.6 percent at $57.11 per barrel

Brent North Sea Crude: DOWN 0.6 percent at $60.71 per barrel

New York - Dow: DOWN 0.7 percent at 45,952.24 (close)

London - FTSE 100: UP 0.1 percent at 9,436.09 (close)

dan/dhw

BANK OF AMERICA

INDEX CORP.