Asian markets extend rout as volatility returns

Asian markets extend rout as volatility returns

Hong Kong- Asian stock markets took another battering Wednesday, with Tokyo leading a day of sharp losses as investors grow increasingly concerned about the world economy and the possibility of a global recession.

More bourses reopened after the Lunar New Year break but immediately plunged into the red, playing catch-up with a rout that has seen billions wiped off valuations from Sydney to Frankfurt to New York this year.

Energy firms were once again in the firing line after oil prices sank below $28 a barrel Tuesday, while financial plays are also coming under increasing pressure as investors fret about their bottom lines in the face of the economic slowdown.

The sell-off is the latest in the past six weeks that has seen severe volatility around the world, fuelled by China's growth slowdown and a crash in crude prices.

The Chicago Board Options Exchange Volatility Index, which measures market turbulence, is sitting around five-month highs and has jumped 20 per cent since Friday.

"Contributing to the drop in oil and certainly having a large impact on the drop in equities is this growing concern about the sustainability of the recovery, the state of economic growth in China and increasingly the state of growth in the US," Russ Koesterich, global chief investment strategist for New York-based BlackRock, told Bloomberg TV.

"People are getting worried about the global recession, worried about growth, which is affecting not only oil and stocks but other risky assets as well." Japan's Nikkei index lost 2.3 per cent to close at its lowest level since October 2014, extending the 5.4 per cent collapse Tuesday as the yen climbed against the dollar.

Sydney shed 1.2 per cent. Singapore, returning from a two-day holiday, sank 2.1 per cent in the afternoon while Wellington, Manila and Mumbai also lost out.

Among energy plays Sydney-listed Woodside shed almost one per cent and miner BHP Billiton was 2.5 per cent off. In Tokyo JX Holdings was more than two per cent off and Inpex eased 2.8 per cent.

Crude continues to be buffeted by the global supply glut, overproduction and weak demand that has sent oil prices crashing more than 70 per cent from mid-2014 highs.

On Tuesday US benchmark West Texas Intermediate slumped almost six per cent and Brent lost 7.7 per cent after the International Energy Agency warned there was unlikely to be any easing of fundamentals.

Bargain buying helped both contracts climb 1.5 per cent in the afternoon Wednesday.

Investors are now awaiting the release later Wednesday of the weekly US stockpiles report as they seek clues to demand in the world's top economy and oil consumer.

Asia's banks were also taking a beating following big losses in their European counterparts as economic fears continue to bite.

Japanese giant Sumitomo Mitsui lost more than five per cent and Mitsubishi UFJ lost seven per cent. In Singapore UOB lost 1.9 per cent in late trade while Sydney-listed ANZ was 1.6 per cent off and Westpac gave up 0.6 per cent.

Investors are keeping a close eye on Federal Reserve chief Janet Yellen's congressional testimony later in the day to see what signals she gives on interest rates. There are hopes she will sound a cautious note after the turmoil that has ravaged markets this year.

Tokyo - Nikkei 225: DOWN 2.3 per cent at 15,713.39 (close)

Sydney - S&P/ASX 200: DOWN 1.2 per cent at 4,775.70 (close)

Singapore - Straits Times Index: DOWN 2.1 per cent at 2,566.68

Euro/dollar: DOWN at $1.1281 from $1.1293 on Tuesday Dollar/yen: DOWN at 114.80 yen from 115.14 yen

New York - Dow: DOWN 0.1 per cent at 16,014.38 (close)

London - FTSE 100: DOWN 1.0 per cent at 5,632.19 points (close)


This article was first published on February 10, 2016.
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