Asian markets track Wall St rout as confusion, uncertainty reign
AFP – Asian markets fell Wednesday following a rout on Wall Street, as investors were bombarded by a "perfect storm" of problems that erased the positivity seen at the start of the week.
The glum mood overshadowed hints from Donald Trump at more time to resolve the China-US trade row, as well as soothing comments from China about their desire to push on with a weekend agreement between the world’s top economies.
Trading floors are awash with uncertainty over the agreement Trump hammered out with Xi Jinping to much fanfare — and an initial market rally — in Buenos Aires, with little clarity emerging and the US president shifting his tone.
While he hailed the deal at first, on Tuesday he warned on Twitter "remember, I am a Tariff Man", adding "When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so".
Then, in another tweet he left open the door to an extension of the agreement’s 90-day timeline to end the row.
On Wednesday, China’s commerce ministry called the pact "successful" and said it "will start with the implementation of the specific matters in which consensus has been reached, the sooner the better", without providing more details.
Adding to the mounting risks are concerns about the US economy after the difference in yields on two- and 10-year bonds narrowed, suggesting traders are increasingly concerned about longer-term prospects.
The are fears of an "inversion" where short-term yields overtake long-term rates, which in the past has been the precursor to a recession.
Wall Street suffered a battering, with the Dow slipping 3.1 percent, S&P 500 3.2 percent lower and Nasdaq 3.8 percent off.
The selling continued into Asia, where Hong Kong plunged 1.6 percent, Shanghai lost 0.8 percent and Tokyo ended the morning 0.4 percent down.
– Pound’s Brexit woes –
Singapore shed 0.8 percent and Seoul was 0.6 percent off, while Wellington dived 1.3 percent. Sydney shed 1.2 percent after data showed the Australian economy grew at a slower pace than expected in July-September. The Australian dollar also sank more than one percent.
The selling "has all the nasty hallmarks that traders typically call the perfect storm," said Stephen Innes, head of Asia-Pacific trade at OANDA. He said investors "are probably left feeling duped, tricked and maybe even snookered by some ill-advised backslapping comments post G20".
"While trade war is certainly the number one driver of global risk sentiment, the current meltdown is morphing into a Hydra with familiar points of irritation — trade, (Federal Reserve), Brexit, Italy, global growth — coming to a head," he added.
On currency markets the pound continued to struggle on concerns that Britain could be heading for the EU exit without a deal, which most observers fear could hammer the economy.
Sterling hit a 17-month low Tuesday after Prime Minister Theresa May suffered stunning defeats in parliament that highlighted the uphill fight she has in pushing through her controversial Brexit deal.
If she loses there are expectations she will face a no-confidence vote and possible defeat that could force early elections and leave the country in chaos.
Oil prices were also down more than one percent after another jump in US inventories came as Saudi Arabia raised questions about the chances of an output cut at a meeting of OPEC and non-OPEC members at the weekend.
Energy Minister Khalid Al-Falih said it was "premature to say what will happen" in Vienna, days after Russian President Vladimir Putin had said the two major producers had agreed to a cap to support prices.
"We need to get together and listen to our colleagues, hear about their views on supply and demand and their projections of their own countries’ production," he said.
Crude had surged Monday and Tuesday after Putin’s comments.
"It’s not a good price signal," Bob Yawger, director of futures at Mizuho Securities USA, told Bloomberg News. "Either demand is bad or all the talk about cutting production is just lip service."
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,946.94 (break)
Hong Kong – Hang Seng: DOWN 1.6 percent at 26,836.56
Shanghai – Composite: DOWN 0.8 percent at 2,644.40
Pound/dollar: DOWN at $1.2710 from $1.2713 at 2200 GMT
Euro/dollar: UP at $1.1337 from $1.1342
Dollar/yen: UP at 112.86 yen from 112.78
Oil – West Texas Intermediate: DOWN 57 cents at $52.68 per barrel
Oil – Brent Crude: DOWN 72 cents at $61.36 per barrel
New York – Dow Jones: DOWN 3.1 percent at 25,027.07 (close)
London – FTSE 100: DOWN 0.6 percent at 7,022.76 (close)