GLOBAL EQUITY MARKETS SINK
Inflation worries trigger broad sell-off in equities
AROUT in global equities deepened in Asia yesterday as inflation worries gripped financial markets, sending United States stock futures sinking further into the red after Wall Street suffered its biggest decline since 2011.
S&P mini futures fell 3.0 per cent to four-month lows, extending their losses from the record peak hit a week ago to 12 per cent, abruptly ending their smooth bull run of recent years. They last stood down 1.1 per cent.
The US benchmark S&P 500 slumped 4.1 per cent and the Dow 4.6 per cent on Monday, suffering their biggest percentage drops since August 2011. Before Monday’s fall, the index had not seen a pullback of more than five per cent for more than 400 sessions, which analysts said was the longest such streak in history.
The gloom is seen enveloping European shares, with spreadbetters expecting Germany’s DAX to sink 6.6 per cent to fivemonth lows, France’s CAC 6.1 per cent to possibly 11-month lows and Britain’s FTSE 4.8 per cent to 14-month lows.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slid 3.4 per cent. Taiwan shares lost 5.0 per cent, its biggest since in 2011 while Hong Kong’s Hang Seng Index dropped 5.12 per cent, or 1,649.80 points, to end 30,595.42 — its biggest close since the China-fuelled selloff in August 2015.
The Shanghai Composite Index lost 3.35 per cent, or 116.85 points, to 3,370.65 while the Shenzhen Composite Index, which tracks stocks on China's second exchange, plunged 4.44 per cent, or 80.21 points, to 1,726.09.
Japan’s Nikkei 225 index closed down 4.73 per cent, or 1,071.84 points, at 21,610.24, its biggest point drop since June 2016, while Seoul lost 1.5 per cent, Mumbai was 0.9 per cent lower and Bangkok plunged 2.4 per cent.
The trigger for the sell-off was a sharp rise in US bond yields following Friday’s data that showed US wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and with it potentially higher interest rates.
Some analysts say markets tend to get edgy when the US Federal Reserve has a new leadership. New Fed chief Jerome Powell, who succeeded Janet Yellen on Monday, is expected to continue Yellen’s stance of gradual tightening. Still, some investors regard a change in the Fed leadership as a source of policy uncertainty.
The CBOE Volatility index, the closely followed “fear-index” measure of expected near-term stock market volatility jumped 20 points to 30.71, its highest since August 2015.
That left some popular exchange-traded products that investors use to benefit from calm market conditions facing potential liquidation.