Most Asian markets yesterday tumbled after US stocks were pummeled at the end of last week, with traders fretting that a surging US economy would lead to sharp interest rate rises by the US Federal Reserve.
The selling was also fueled by profit-taking after a blistering month last month that saw several indexes strike record or multi-year highs, while energy firms were hit by a drop in oil prices.
Fresh turmoil in Washington after US President Donald Trump approved the declassification of a controversial memo linked to the FBI’s Russia probe also caused a stir.
In New York on Friday the Dow Jones Index plunged more than 2 percent after the release of a healthy jobs report for last month that showed the biggest increase in wages in nine years.
The news sent benchmark 10-year Treasury yields — a key guide to interest rates globally — to fresh four-year highs and raised concerns that monetary policy could tighten more than thought.
Equity markets were already in negative territory last week owing to rising bond yields and profit-taking.
The losses seeped through to Asia this week. Tokyo ended 2.6 percent lower, while Hong Kong sank more than 1 percent in the afternoon and Sydney closed down 1.6 percent.
Seoul lost 1.3 percent, Singapore dropped 1.2 percent and Taipei shed 1.62 two percent, with Manila, Jakarta and Wellington also suffering in the heaviest blood-letting in the region this year.
However, Shanghai recovered to end 0.7 percent higher.
“It’s going to be a nervous start to the week for traders across all markets as they wonder if last week’s reversal in US stocks and the ugly close Friday ... is likely the start of something bigger,” AxiTrader chief market strategist Greg McKenna said.
The rise in bond yields, fueled by a surging US economy and corporate earnings, has spooked traders worried that the Fed will raise borrowing costs more than the three times initially expected this year.
“When interest rates rise, it makes equities look less attractive to fixed-income investors, but also it chokes off economic growth,” said Rich Weiss, chief investment officer and senior portfolio manager of multi-asset strategies at American Century Investments. “When longer-term interest rates rise, that tends to stem inflation and economic growth, and that feeds back into corporate profits,” he told Bloomberg News.
Other analysts warned that markets could see a 10 percent correction over the coming weeks as traders readjust their outlook for interest rates.
The US dollar was boosted by the jobs figures and yesterday managed to hold on to the gains it made against the yen, pound and euro.
Energy firms across Asia were down sharply as crude tanked on the back of news that US drillers brought more rigs back online to take advantage of a recent rise in prices.
CNOOC Ltd (中國海洋石油), PetroChina Co (中國石油天然氣) and Sinopec Corp (中國石油化工) all sank about 3 percent in Hong Kong, while Inpex Corp bombed almost 4 percent in Tokyo and Woodside Petroleum Ltd was off 2.6 percent in Sydney.
Tech firms were hit early on after Apple and Google parent Alphabet lost 4 percent following disappointing earnings reports. Hong Kong-listed Tencent Holdings Ltd (騰訊) plunged almost 2 percent, while Sharp Corp dived 4 percent in Tokyo.
However, Samsung Electronics Co bounced back from 3 percent losses in morning Seoul trade, after an appeals court upheld Samsung heir Jay Y. Lee’s bribery conviction, but cut his prison sentence to a suspended term, ordering his immediate release.
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