Asian markets fall sharply after U.S. losses

Irving Hamilton
October 11, 2018

Sydney/Shanghai: Asian share markets sank in a sea of red on Thursday after Wall Street suffered its worst drubbing in eight months, a conflagration of wealth that could threaten business confidence and investment across the globe. Markets across Southeast Asia recorded similar declines.

The U.S. Treasury is due to release a currency report that some analysts suggest might change the official stance on China's exchange rate policy. Investors have long feared the trade war would crimp profits, and now a group of companies is warning that is happening at the same time that rising bond yields make the cost of borrowing higher.

On Wednesday, President Donald Trump said the Federal Reserve "is making a mistake" with its campaign of rate increases. "I think the Fed has gone insane".

"Equity markets were pulverized today as investors remain in full out retreat and even the most pessimistic of equity bears are still in shock by the sheer magnitude of the move", he added.

"This meltdown isn't just a mild case of the sniffles, suggesting the latest sneeze from the US equity market could morph into a global markets pandemic", he added. "This meltdown isn't just a mild case of the sniffles suggesting the latest sneeze from the US equity market could morph into a global markets pandemic".

The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States.

Sinking global shares have raised the stakes for US inflation figures due later on Thursday.

The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions. Hong Kong's Hang Seng index shed 3.8 percent to 25,192.26. Seoul's Kospi index .KS11 dropped 3.8 percent. Australia's S&P/ASX 200 slipped 2.4 per cent to 5,906.00.

Asia stock indexes added to the global market's pain on Thursday, with benchmarks in Shanghai, Shenzhen and Tokyo all skidding between 4 and 5 percent.

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Tropical storm warnings and watches are in effect all along the Southeast coast as far north as the Outer Banks, per TWC. The dire verdict is due in part to the extremely rapid strengthening of the storm, from Category 2 in the morning.

World stock markets sank Thursday, extending losses from Wall Street, as investors anxious that higher interest rates will dent company earnings and a trade war will crimp global business.European shares sank after Asia closed sharply lower, auguring another drop in the US, which saw its major indexes tumble on Wednesday.

The Dow Jones Industrial Average lost 101 points, or 0.4 percent, to 25,497. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1% lower at 7,422.05.

Just a day before the start of America's third-quarter earnings season, signs are mounting that companies might not be able to deliver the runaway growth that's bolstered equities so far in 2018.

Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in 2 1/2 years. Shares of Facebook, Amazon, Apple and Netflix and Google, the so-called FAANG stocks, were among the hardest hit, shedding billions in market capitalization.

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, says "the valuation of US stocks, especially tech stocks, is still pretty high", and investors could be tempted to not buy into them yet.

"I think what happened was that we were a maximum elevation of risk appetite and maximum valuation of (U.S.) large caps and tech, so when you have that situation you are always vulnerable", said UBP macro and FX strategist Koon Chow.

The dollar rose to 112.34 yen from 112.27 yen late Wednesday. The euro rose to 1.1566 U.S. dollars from 1.1523 dollars.

Oil futures fell. US crude gave up 70 cents to $72.47 a barrel. The contract settled at 73.17 dollars in NY.

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