Asian markets close on three-week lows, weighed by ECB, Fed
Asian equities slumped to three-week lows Friday, following a global sell-off overnight as investors digested comments from the Fed and the European Central Bank (ECB).
Overnight, Fed chair Janet Yellen said in a testimony before Congress that recent economic data back the central bank’s expectations of an improved job market. The U.S. non-farm payrolls number for November is due later today. Yellen added the bank will proceed with caution in raising interest rates from near zero and that Fed funds rates would remain accommodative after the initial increase.
Elsewhere, ECB president Mario Draghi announced monetary policy measures that fell short of market expectations. The central bank cut deposit rate by 10 basis points to negative 0.3 percent and said its asset purchase program will also be extended until at least March 2017 and broadened in scope.
Anatoli Annenkov, senior European economist at Societe Generale said in a note “While theories of a pushback from other Governing Council members to the Executive Board’s recent dovish messages will flourish, it may simply reflect the conclusions the tasked ECB committees arrived at: that the recovery continues, that monetary policy is effective and that the new measures are judged enough.”
U.S. markets saw steep losses overnight with the Dow Jones Industrial Average down 252 points or 1.42 percent at 17,478; the S&P 500 was down 30 points or 1.44 percent at 2,049. The Nasdaq was down 86 points or 1.7 percent at 5,038.
Japan, South Korea markets weighed by ECB decision
The sell-off contagion from overnight spread to Asia, pushing the Japanese and South Korean markets firmly in the red.
Japan’s 225 hit a three-week low, down 435 points or 2.2 percent at 19,505 and trading mostly in the red across the board.
The big news out of Japan on Friday was the announcement of a three-way merger between Toshiba, Fujitsu, and Sony’s PC spin-off business Vaio.
The Nikkei reported the trio are considering an integration of their PC operations which would give them upwards of 30 percent of the Japanese marketshare, surpassing market leader NEC Lenovo Japan. It would also make them a notable global competitor.
Shares in Sony were down in morning trade by 2.4 percent, Toshiba saw losses of 1 percent, while Fujitsu was up by 2.33 percent.
In the South Korean market, the Kospi continued its losing run this week and closed 20 points or 1 percent lower at 1,974, its worst performance in over three weeks.
Blue chip shares were all firmly in the red. Shares in Samsung Electronics were down 1.63 percent, steel manufacturer Posco was down 1.16 percent while Kepco saw losses of 2 percent.
China market pares back some losses
The Shanghai Composite traded down 56 points or 1.56 percent at 3,529 in the late afternoon session as investors remained cautious.
Earlier, reports citing regulatory sources said China will launch circuit breakers for major stock indexes in the country starting in 2016 to stabilize the market during periods of volatility and prevent mass sell-offs failed to lift sentiment.
Chinese finance stocks still traded in the red, with brokerages seeing losses between 1.5 and 3.3 percent. Shares in Huatai Securities continued to see losses and was down 3.26 percent.
Shares in major banks were mostly down between 1.2 and 3.41 percent, with shares in China Construction Bank down 3.41 percent.
Properties were also in negative territory, with the likes of Vanke, Shanghai Shi Mao, Gemdale, and Poly Real Estate seeing losses between 0.4 and 3.2 percent.
Overall sentiment in China’s economy remain cautious. Bank of America Merill Lynch said in a recent note that data from November will continue to be mixed and suggest risks for growth. The note said, “Industrial production (IP) and fixed asset investment (FAI) growth could still be sluggish due to the lack of demand pick up amidst poor weather in the month, while retail sales growth data will likely demonstrate the relative resilience in consumption.”
Already, China’s Purchasing Managers Index (PMI), a measure of manufacturing activity, fell below expectations.
Source: CNBC – Asian markets close on three-week lows, weighed by ECB, Fed
