Asian stock markets sank across the board Thursday as pessimistic sentiment following a dive in oil prices
Asian markets are buckling today after steep losses on Wall street fuelled yet more warnings of another global meltdown as oil prices tumble.
The international Brent price of crude oil has tumbled 0.9 per cent, to $30.05, after making a slight recovery from a 12-year-low of $29.73, after a disastrous day for investors.
Standard and Poor’s 500 index, the most closely watched gauge of the broader market, fell almost 50 points, a plunge so deep that it triggered a ‘correction’ – meaning a drop of 10 percent or more from its peak back in May last year.
The Dow Jones industrial average also slumped, losing more than 300 points, making the first eight trading days of 2016 the worst start to a year in the history of both indexes.
And any optimism over the slight recovery on London’s FTSE has been dashed by plunging prices in Asia.
‘Perhaps $30 or just slightly below is acting as a little bit of a floor, but that being said that’s a straw in a hay barn in terms of positivity,’ said Ben le Brun, market analyst at OptionsXpress in Sydney.
‘The rest of the news is decidedly negative about oil,’ he said.
London copper fell to its lowest since May 2009, compounding worries about the effect of China’s waning growth on demand for commodities.
Copper was last down 0.4 percent at $4,375.50 a tonne after earlier dropping as low as $4,330 on the FTSE, which closed 0.5 per cent up yesterday at 5,960.
The rocky start to the year reflects mounting worries on Wall Street about the slowdown in China, the world’s second-biggest economy, and a plunge in oil prices to the lowest level in 12 years.
As a result, energy and consumer stocks bore the brunt of the selling earlier today as the price of U.S. crude oil remains near $30 a barrel.
At that level, investors fear oil and gas companies could be forced into bankruptcy. Brent crude, the international standard, fell 2 percent.
‘At the very core of this, there’s a bull-bear debate,’ said Quincy Krosby, market strategist at Prudential Financial.
The international Brent price of crude oil has tumbled 0.9 per cent, to $30.05, after making a slight recovery from a 12-year-low of $29.73, after a disastrous day for investors, sending markets plunging
‘The momentum names that drove this market higher have just been clobbered,’ Krosby added.
The S&P 500, which had reached a record high in May last year, is now down 7.5 percent this year, while the Dow is off 7.3 percent.
The Nasdaq is deeper in the red, down 9.6 percent. The Russell 2000, which is made up of small-company stocks, is down 20 percent from its June peak.
Today, MSCI’s broadest index of Asia-Pacific shares outside Japan extended early losses and was down 2 per cent.
China’s main stock indexes fell, with the Shanghai Composite Index trading down 1 per cent and the CSI300 index off 0.6 per cent.
South Korea’s KOSPI was down 1.5 percent, after the country’s central bank kept interest rates unchanged for a seventh straight month as expected.
The slowdown in the Chinese economy, the second largest in the world, has spooked investors while the low price of oil led to huge sell-offs in the energy sector
The Bank of Korea said it would monitor recent market turmoil sparked by developments in China as well as the effects of the U.S. Federal Reserve’s December rate hike.
Japan’s Nikkei cratered 4 per cent, as downbeat domestic data added to the gloom. The yield on the benchmark 10-year Japanese government bond touched a fresh record low of 0.190 percent.
Japan’s core machinery orders fell 14.4 percent in November from the previous month, down for the first time in three months and marking a bigger decline than economists’ median estimate for a 7.9 percent drop.
‘Investors are increasingly worried that the (U.S.) market is not strong enough to withstand an initial view that the Fed would hike rates four times this year,’ said Masashi Oda, senior investment officer at Sumitomo Mitsui Trust Bank.
Boston Fed President Eric Rosengren sounded a cautious tone overnight, saying global and U.S. economic growth may be slipping and could force the Fed into a more gradual course of rate hikes than officials currently expect.
The first eight days of 2016 are now officially the worst on record for both the Dow Jones and the S&P 500 after both indexes recorded considerable falls on Wednesday
On Wednesday, better-than-expected China trade data lifted Asian sentiment and gave equities and commodities prices a much-needed boost. But those gains unravelled later in the global session, and major U.S. stock indexes finished with sharp losses.
The benchmark 10-year U.S. Treasury yield plumbed its lowest levels since late October as investors sought safety in government debt. It stood at 2.068 percent in Asian trade, compared with its U.S. close of 2.066 percent on Wednesday.
Undermined by lower U.S. yields, the dollar lost ground to its perceived safe-haven Japanese counterpart. It was buying 117.42, down about 0.2 percent. The euro edged up about 0.2 percent to $1.0892.
Market participants continued to keep an eye on China’s yuan. It weakened even after the People’s Bank of China set its midpoint rate at 6.5616 per dollar prior to market open, firmer than the previous fix of 6.563.
The PBOC has held the line on its currency in the past few days, calming some fears of a sustained depreciation.