Losses on Wall Street ripple through Asia as stocks slump
Investors are wary of possible further US interest rate hikes.
Asian markets were broadly lower on Thursday after Wall Street slumped on a heavy selling of technology and internet stocks.
Japan’s benchmark fell by an unusually wide margin of 3.9% and China’s main index lost 4.3%.
Markets in Hong Kong, South Korea, Australia and Southeast Asia recorded similar declines.
Investors are wary of possible further US interest rate hikes, which will raise the cost of corporate borrowing and could drag on economic growth.
The US Federal Reserve recently raised short-term interest rates for the third time this year, with one more expected before the year ends.
Strong economic data and a positive outlook from Fed officials have led to a sell-off in US Treasury bonds, particularly longer-term ones, sparking concerns about even higher interest rates.
On Wednesday, President Donald Trump said the Fed “is making a mistake” with its campaign of rate increases.
“I think the Fed has gone crazy,” he charged.
If the Feds are crazy, this market reaction is bordering on insanity Stephen Innes, of OANDA
Stephen Innes of OANDA said that Mr Trump’s comments have put pressure on the dollar but “the severity of this equity rout could bring the hawkish Fed narrative into question”.
“If the Feds are crazy, this market reaction is bordering on insanity, as so many negative crosscurrents collide that is merely impossible to find a glint of optimism,” he added.
Sentiment also has been dampened by the spreading US-Chinese tariff fight over Beijing’s technology policy.
The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions.
Tokyo’s Nikkei 225 gave up 3.9% to 22,591.10 and the Shanghai Composite lost 4.3% to 2,607.44. The Kospi in South Korea fell 3.6% to 2,148.97. Australia’s S&P/ASX 200 slipped 2.4% to 5,906.00.
Stocks plunged in Taiwan and fell across Southeast Asia.
US stocks slumped on Wednesday as concerns over rising interest rates and trade tensions caused a sell-off in technology and internet stocks. The Dow Jones Industrial Average suffered its worst loss in eight months, falling 3.1 % to 25,598.74.
The S&P 500 index sank 3.3% to 2,785.68. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1% lower at 7,422.05. It has fallen 7.5% in just five days.
The Russell 2000 index of smaller-company stocks shed 2.9%, to 1,575.41.
Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two-and-a-half years. Apple slipped by 4.6% while Amazon lost 6.2%.
Amazon has soared 50% this year, but its stock has fallen 14% from its all-time high in early September.
Francis Tan, an investment strategist at UOB private bank, believes the markets will likely pick up in the US session.
“The valuation of US stocks, especially tech stocks, is still pretty high and there could be some profit taking actions now,” Mr Tan explained.
The dollar slipped to 112.17 Japanese yen from 112.27 yen late on Wednesday. The euro rose to 1.1566 US dollars from 1.1523 dollars.
Oil futures fell. US crude gave up 1.27 dollars to 71.90 dollars a barrel. The contract settled at 73.17 dollars in New York. Brent crude, the international standard, dropped 1.58 dollarsssss to 81.51 dollars a barrel.