Dow Jones futures decline due to loan fraud, US-China tensions

• Dow Jones futures decline as market sentiment sours following loan fraud disclosures by two US regional banks.
• Zions posted a $50 million Q3 loss, while Western Alliance sued Cantor Group V, LLC over alleged fraud.
• US index futures face challenges due to increased risk aversion amid escalating US-China tensions and the government shutdown.

Dow Jones futures fall 0.61% to move below 45,900 during European hours on Friday, ahead of the opening of the United States (US) regular session. The S&P 500 futures decline 0.88% to trade near 6,600, while Nasdaq 100 futures plunge 0.96% to break below 24,600 at the time of writing.

US index futures lose ground as market sentiment remains subdued after two US regional banks disclosed commercial loan fraud, increasing concerns about regional bank credit quality. US bank stocks, including Zions Bancorporation, Jefferies, and Western Alliance, tumbled on Thursday as investor concerns rose over sector risks linked to two major auto bankruptcies. Investors now look ahead to earnings reports from other regional lenders, including Comerica and Fifth Third.

On Thursday's regular session, the Dow Jones declined 0.65%, the S&P 500 fell 0.63%, and the Nasdaq 100 lost 0.47%, with financials leading the declines. Zions Bancorporation shares dropped 13% after revealing a $50 million third-quarter loss on two commercial and industrial loans from its California division. Western Alliance Bancorporation fell nearly 11% after the bank announced a lawsuit alleging fraud by Cantor Group V, LLC.

Risk aversion rises amid the escalating trade tensions between the United States (US) and China, the world's two largest economies. US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent criticized China's plans to restrict rare earth exports, calling them "economic coercion" and "a global supply chain power grab."

US shares also face challenges due to risk-off sentiment, driven by the prolonged US government shutdown. The impasse will continue into next week as the US Senate once again failed to pass a Republican bill to extend funding and end the stalemate.