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10 February, 2018 00:00 00 AM
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Asia stocks tank for second time in a week as global rout resumes

AFP
Asia stocks tank for second time in a week as global rout resumes
An investor reacts while keeping an eye on stock price movements shown on a screen at a security company in Shanghai yesterday. Shanghai stocks plunged more than 5 per cent by late morning yesterday in the wake of renewed gloom on Wall Street and European markets. AFP PHOTO

AFP, HONG KONG: Asian trading floors were a sea of red once again yesterday as the global rout returned with a vengeance on intensifying fears about tighter US interest rates. Tokyo, Hong Kong and Shanghai were among the worst hit as investors piled into safe haven assets such as gold and the yen.

The sell-off followed another battering for Wall Street, where the Dow suffered its second-heaviest daily points fall on record—the worst coming on Monday—after key US Treasury bond yields spiked fuelling the likelihood of higher borrowing costs.

After a blistering 2017 and January, markets worldwide have gone into a spasm in the past two weeks on fears that the booming global economy and rising inflation will lead to higher interest rates.

“There’s some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades,” Doug Cote, chief market strategist at Voya Investment Management, told Bloomberg News. “They could be in full panic mode right now.”

Japan’s Nikkei fell 2.3 per cent and is now at levels not seen since mid-October, while Hong Kong dropped more than three per cent to put it on course to wipe out its 2018 gains. Shanghai dived 4.1 per cent to seven-month lows.

Sydney fell 0.9 per cent, Singapore shed 1.7 per cent and Seoul was 1.8 per cent off. Wellington, Manila and Taipei were also hammered.

Pound, euro rally

A key trigger of the recent pullback was last Friday’s strong US jobs report that also showed rising US wage growth, fuelling speculation the Federal Reserve will lift rates more than the three times already expected this year.

At the same time, the European Central Bank is on the verge of ending its crisis-era stimulus, while the Bank of England warned Thursday that rates will likely rise.

“The message from ECB and Fed speakers, not to mention the Bank of England is that rates will continue to climb because of the strength of the global economy,” said Greg McKenna, chief market strategist at AxiTrader.

With eurozone and British borrowing rates expected to go up, the euro and pound climbed against the dollar.

The greenback edged up against the yen but was still sharply down from Thursday’s levels in Asia as panicked investors sought out safety. The dollar fell to as low as 108.50 yen from almost 110 yen the day before, hit by a weak sale of US bonds, which jacked their yield back close to four-year highs.

However, many analysts are upbeat about the future owing to healthy economic conditions in the US and global economies as well as the positive outlook for corporate earnings after Donald Trump’s massive tax cuts in December.

There was also some good news from Washington where senators agreed a budget bill to avoid another extended government shutdown.

Energy firms around Asia are again taking a beating, with plunging oil prices adding to their woes.

Data showing surging US production has sent crude spiralling downward, with both main contracts about 10 per cent off their January highs, and offsetting a cap deal between OPEC and Russia.

Sukrit Vijayakar of Trifecta Consultants said the record high US output figure “suggests that it is now possible to ramp up production even higher quite soon” which would be negative for a market trying to soak up excess supplies to balance them with demand.

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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