Asian markets sink after Wall St plunge, Treasury yields fan fear
05 Feb 2018 - 11:10
Hong Kong: Most Asian markets tumbled Monday after US stocks were pummelled at the end of last week, with traders fretting that a surging US economy will lead to sharp interest rate rises by the Federal Reserve.
The selling was also fuelled by profit-taking after a blistering January 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 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 plunged more than two percent after the release of a healthy January jobs report 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 will 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 one percent in the afternoon and Sydney closed down 1.6 percent.
Seoul lost 1.3 percent, Singapore dropped 1.2 percent and Taipei shed 1.6 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," said Greg McKenna, chief market strategist at AxiTrader.
The rise in bond yields, fuelled by a surging US economy and corporate earnings, has spooked traders worried that the Federal Reserve 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 dollar was boosted by the jobs figures and on Monday managed to hold on to the gains it made against the yen, pound and euro.
Energy firms across Asia were sharply down 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, PetroChina and Sinopec all sank around three percent in Hong Kong, while Inpex bombed almost four percent in Tokyo and Woodside Petroleum was off 2.6 percent in Sydney.
Tech firms were hit early on after Apple and Google parent Alphabet lost four percent following disappointing earnings reports.
Hong Kong-listed Tencent plunged almost two percent Monday, while Sharp dived four percent in Tokyo.
However, Samsung bounced back from three percent losses in morning Seoul trade, after an appeals court upheld heir Lee Jae-Yong's bribery conviction but cut his prison sentence to a suspended term, ordering his immediate release.