Asian markets slumped yesterday, led by a 4 percent fall in Tokyo, following a huge sell-off on Wall Street as disappointing US manufacturing data compounded already deep fears about emerging markets.
Traders were also spooked by a warning from US Secretary of the Treasury Jack Lew, who warned that the US borrowing limit would be reached on Friday, renewing fears of a Washington standoff and possible default.
Tokyo dived 4.18 percent, or 610.66 points, to 14,008.47. The losses leave the Nikkei 14 percent down since the start of the year, having surged 57 percent last year to mark its best year in four decades.
Seoul fell 1.73 percent, or 33.11 points, to 1,886.85, and Sydney lost 1.75 percent, or 90.8 points, to 5,097.1.
Hong Kong plunged 2.89 percent, or 637.65 points, to 21,397.77. Chinese tech giant Lenovo Group ( (聯想) dived 16.4 percent on fears it may have bitten off more than it can chew with the purchase last week of struggling Motorola Mobility from Google Inc for US$2.91 billion.
Shanghai and Taipei were closed for the Lunar New Year holiday.
US stocks took a hammering on Monday after the Institute for Supply Management said that its purchasing managers index (PMI) of manufacturing activity fell to 51.3 last month from 56.5 in December. A figure above 50 indicates growth and anything below points to contraction.
On Wall Street the Dow closed down 2.08 percent, the S&P 500 fell 2.28 percent and the NASDAQ 2.61 percent.
The results — following worse-than-expected jobs data last month — raised concerns the US economy may not be as strong as initially thought, a worry for investors less than a week after the US Federal Reserve said it would reduce its stimulus, citing signs of a strong recovery.
They also come as emerging markets are rattled by fears of capital flight caused by the Fed tapering as well as signs of weakness in China, a key driver of global growth.
China at the weekend released official figures showing its PMI fell to 50.5 last month from 51 in December and HSBC last week said its PMI for the country came in at a six-month low of 49.5.
“Suffice to say investors should steer clear of risk assets [such as equities] over the short term as the turmoil does not look like it will be over anytime soon,” Credit Agricole analyst Mitul Kotecha said.
“A combination of tapering, a confluence of country specific emerging market country concerns and weaker growth in China provide the backdrop for a volatile few weeks if not longer, ahead,” he said in a note.
In the US Lew said that time was running out for politicians to raise the government’s debt limit. Analysts warn that failure to meet its obligations could lead to a global downturn similar to the 2008 financial crisis.
“Congress needs to act to extend the nation’s borrowing authority, and it needs to act now,” Lew said in prepared remarks at the Bipartisan Policy Center, a Washington think tank.
He warned that officials would have to start using special measures after Friday to keep the US paying its bills. While previous standoffs have ended in agreement between Republicans and Democrats, they did not come before causing global market turmoil.