Losses on Wall Street rip through Asian financial markets

SINGAPORE — A stock market rout that started on Wall Street rolled through Asia, driving China’s benchmark to a four-year low on Thursday and knocking down indexes in Japan, Korea and Australia.

The Shanghai Composite index plunged 5.2 per cent to its lowest level since November 2014 and Japan’s Nikkei 225 fell by an unusually wide margin of almost 4 per cent. Markets across Southeast Asia recorded similar declines.

“Equity markets were pulverized today,” with investors in “full out retreat,” Stephen Innes of OANDA said in a commentary. The “latest sneeze” from Wall Street “could morph into a global markets pandemic,” he added.

Investors are wary of possible further U.S. interest rate hikes, which will raise the cost of corporate borrowing and weigh on economic growth.

On Wednesday, President Donald Trump said the Federal Reserve “is making a mistake” with its campaign of rate increases. “I think the Fed has gone crazy,” he charged.

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“Equity investors are surprised by the pace at which rates have risen,” said Marcella Chow, global market strategist at J.P. Morgan Asset Management in a report.

Sentiment also has been dampened by the spreading U.S.-Chinese tariff fight over Beijing’s technology policy. The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions.

The U.S. Treasury is due to release a currency report that some analysts suggest might change the official stance on China’s exchange rate policy. Chow said it was unclear whether the Treasury might label Beijing a “currency manipulator” — a status that could trigger penalties — or whether it could be “another pre-text for the next round of tariffs.”

Adding to potential U.S.-China tensions, the Justice Department announced Wednesday it arrested an official of China’s Ministry of State Security on charges of trying to steal trade secrets from U.S. aerospace companies.

Tokyo’s Nikkei 225 gave up 3.9 per cent to 22,590.86 and the Shanghai Composite index lost 5.2 per cent to 2,583.46. Hong Kong’s Hang Seng index shed 3.7 per cent to 25,220.67. The Kospi in South Korea fell 4.4 per cent to 2,129.67. Australia’s S&P/ASX 200 slipped 2.7 per cent to 5,883.80. Stocks plunged in Taiwan and fell across Southeast Asia.

On Wednesday, U.S. stocks slumped as concerns over rising interest rates and trade tensions caused a sell-off in technology and internet stocks. The Dow Jones Industrial Average suffered its worst loss in eight months, falling 3.1 per cent to 25,598.74.

The S&P 500 index sank 3.3 per cent to 2,785.68. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1 per cent lower at 7,422.05. It has fallen 7.5 per cent in just five days. The Russell 2000 index of smaller-company stocks shed 2.9 per cent, to 1,575.41.

Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in 2 1/2 years. Apple slipped by 4.6 per cent while Amazon lost 6.2 per cent.

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

Francis Tan, an investment strategist at UOB Private Bank, believes that the markets will pick up in the U.S. session. “The valuation of U.S. stocks, especially tech stocks, is still pretty high and there could be some profit taking actions now,” Tan explained.

The dollar rose to 112.34 yen from 112.27 yen late Wednesday. The euro rose to $1.1546 from $1.1523.

Oil futures fell. U.S. crude gave up 70 cents to $72.47 a barrel. The contract settled at $73.17 in New York. Brent crude, the international standard, dropped 76 cents to $82.33 a barrel.

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AP Business Writer Joe McDonald in Beijing contributed to this report.

Annabelle Liang, The Associated Press