Interest rate fears trigger sell-off on Wall Street

Dow Jones industrials sink 700 points as bond yields rise

Dow Jones industrials sink 700 points as bond yields rise

Asian markets were broadly lower on Thursday after Wall Street slumped on a heavy selling of technology and internet stocks.

The Shanghai Composite index plunged 5.2 percent to its lowest level since November 2014 and Japan's Nikkei 225 fell by an unusually wide margin of nearly 4 percent.

Markets in Hong Kong, South Korea, Australia and Southeast Asia recorded similar declines.

Investors are wary of possible further USA interest rate hikes. 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.

This reflected investor concern that the Federal Reserve will continue to raise interest rates and that this will slow economic growth and make borrowing more expensive for the USA government, as well as businesses and consumers.

The blood letting was bad enough to attract the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.

"I think the Fed has gone insane", he charged.

"If the Feds are insane, this market reaction is bordering on insanity, as so many negative crosscurrents collide that is merely impossible to find a glint of optimism", he added.

The negative sentiment was also reflected in European markets, with Paris, London and Frankfurt ending their sessions firmly in the red.

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.

Investors have also become concerned that escalating tensions between the U.S. and China over trade will lead to a slowdown in global demand.

Tokyo's Nikkei 225 gave up 3.9% to 22,591.10 and the Shanghai Composite lost 4.3% to 2,607.44. In Australia, the benchmark ASX 200 dropped 2 per cent on opening to 5,926.

At one point, Taiwan was down by almost 6%, with Sydney and Singapore both fell by more than 2%.

Asian stocks slumped in early trade as concerns about higher USA interest rates and a global trade war prompted investors to sell risk globally.

The Dow Jones industrial average dropped more than 800 points in trading on Wednesday, one of the worst sell-offs since February as traders rushed to sell stocks that have been driving the USA economy. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1 percent lower at 7,422.05.

Shanghai shares dropped 4.3 percent, on track for their worst day since February 2016, to their lowest level since late 2014, while China blue chips slid 4 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 2.7 percent to its lowest in 18 months. Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two and a half years. The S&P technology sector dropped 4.8 per cent, with Apple Inc down 4.6 per cent.

Amazon has soared 50% this year, but its stock has fallen 14% from its all-time high in early September.

"China buying yuan and selling dollars would likely entail some selling of U.S. Treasuries at a point where the market is showing some vulnerability, and could be very vulnerable to signs of China liquidation", added Ruskin.

"The valuation of United States stocks, especially tech stocks, is still pretty high and there could be some profit taking actions now", Mr Tan explained.

A man is seen behind an electronic board displaying the Nikkei average and Japanese yen rate againt the USA dollar at the Tokyo Stock Exchange in Tokyo, Japan, October 11, 2018.

Oil futures fell. USA crude gave up 96 cents to $72.21 a barrel. Brent crude, the worldwide standard, dropped 76 cents to $82.33 a barrel.

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