Asian stock markets tumble after Wall Street rout
Overnight, the S&P 500 Index erased this year’s gains following mixed earnings reports from companies such as AT&T and Texas Instruments.
An equities rout that wiped out this year’s gains for US stocks spread to Asia today as concerns mounted that corporate profits and economic growth are peaking amid rising borrowing costs. The yen climbed on demand for haven assets, while Treasuries held gains and the dollar nudged lower. Most stock gauges across the region lost more than 2 percent, pushing the MSCI Asia Pacific Index deeper into a bear market.
The S&P 500 Index erased this year’s gains following mixed earnings reports from companies such as AT&T and Texas Instruments. The benchmark extended its October rout to almost 9 percent, making it the worst month since February 2009, while the Nasdaq Composite Index fell into a correction. Gold climbed.
“The fear is palpable in stock markets at the moment,” Greg McKenna, a markets strategist at McKenna Macro, wrote in a note Thursday. “When folks are struggling to explain the driver of a move that means an obvious circuit breaker is also not in evidence. So this could get much worse before it gets better. Collapses happen after falls. That’s the danger.”
Sentiment has been tested in October, with stocks poised for their worst month in more than six years as the effects of trade tensions, geopolitics and rising Federal Reserve interest rates begin to bite. Investors remain apprehensive as a flood of earnings, while mostly stellar, have come with warnings about the future impact of tariffs and rising costs.
Not helping matters Wednesday was underwhelming economic data, particularly on the rate-sensitive housing front with new home sales continuing to slide. Traders also had to deal with reports that potential bombs were sent to two former U.S. presidents and the New York headquarters of CNN.
“A lot of people got in the market in January, thought it was going to be easy money and we’ve had two shakeouts,” Scott Minerd, Guggenheim Partners chairman of investments and global chief investment officer, said on Bloomberg Television. “People are getting nervous.”
Still, Minerd said he was looking for bargains in the recent wipeout: “The fundamentals look great. The whole scenario we talked about in August - growth in corporate earnings, the benefits of the tax cuts - it’s all holding up. The big psychological break was when the 10-year note went above 3 percent and all of a sudden it started to wake people up. It doesn’t change my near-term outlook, which is now positive.”
Elsewhere, European politics remained in focus, with Italian Prime Minister Giuseppe Conte doubling down on his government’s budget proposal and U.K. Prime Minister Theresa May’s cabinet descending into conflict. The pound held losses. Gold gained and oil declined.
Here are some key events coming up this week:
Earnings season rolls on with notable highlights including Twitter, UBS and Total. ECB policy makers could on Thursday confirm that asset purchases will end this year, reiterating its pledge to keep interest rates at record lows through summer 2019. President Mario Draghi will hold a press conference. U.S. gross domestic product growth may have slowed in the third quarter, yet remained near its best pace since mid-2015, according to forecasts ahead of Friday’s release.
These are the main moves in markets:
Japan’s Topix index tumbled 2.8 percent and the Nikkei 225 Stock Average slumped 3.5 percent as of 10:40 a.m. in Tokyo. Australia’s S&P/ASX 200 Index fell 2.3 percent. South Korea’s Kospi index slid 2.6 percent. Hong Kong Hang Seng Index declined lost 2 percent. Shanghai Composite Index was down 2.1 percent. S&P 500 futures rose 0.3 percent. The S&P 500 dropped 3.1 percent, while the Nasdaq Composite Index tumbled 4.4 percent. The MSCI Asia Pacific Index slid 2.1 percent, taking its drop from a January peak to 22 percent.
The yen rose 0.2 percent to 112.03 per dollar. The offshore yuan was steady at 6.9485 per dollar. The Bloomberg Dollar Spot Index lost 0.1 percent after ending Wednesday 0.4 percent stronger and reaching the highest level of the year. The euro traded at $1.1410, up 0.2 percent.
The yield on 10-year Treasuries held at 3.10 percent. It dropped seven basis points Wednesday. Australia’s 10-year bond yield declined four basis points to 2.62 percent.
West Texas Intermediate crude dropped 0.9 percent to $66.25 a barrel. Gold rose 0.2 percent to $1,236.07 an ounce.
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