Asian stocks track US sell-off on stimulus worries
HONG KONG: Asian markets fell on Friday, tracking the Dow on Wall Street’s first loss in six sessions, with traders left disappointed by comments from central banks in Japan and Europe that caused them to roll back their stimulus hopes.
Trading floors worldwide have been humming with excitement for the past few weeks, racking up trillions of dollars in gains, as leaders promised measures to kickstart economies in the wake of Britain’s shock EU exit vote.
The upbeat outlook, strong US data and expectations Japan would unveil a huge stimulus — reportedly worth 20 trillion yen — also sent the yen tumbling against the dollar.
However, the Japanese unit soared on Thursday after the BBC aired a month-old interview with Bank of Japan governor Haruhiko Kuroda in which he said “no need and no possibility” for so-called helicopter money to be part of any package. The strategy of helicopter money sees the bank funnel cash directly into the economy, such as putting cash straight into people’s bank accounts, rather than the more traditional bondbuying method.
The dollar plunged from levels above 107 yen to end Thursday at 105.76 yen. On Friday morning it bought 105.90 yen.
The “comments will disappoint investors who had been selling the yen in anticipation of the Bank of Japan announcing helicopter money at its meeting next week,” Jasper Lawler, a London-based analyst at CMC Markets, said.
“After the failure of its current... easing programme to boost inflation, helicopter money is one of the few remaining tools in the Bank of Japan’s arsenal.”
On Thursday the European Central Bank held off unveiling any new stimulus, as expected. But with the shock vote by Britain to leave the European Union expected to hit growth, there was hope boss Mario Draghi would give a strong hint at more relief.
Instead, he only signalled the “readiness, willingness, ability” of policymakers to step in if needed, while praising the resilience of the markets following the Brexit vote.
European markets ended lower, while the Dow, which had seen six straight gains to hit new records, ended slightly lower, with below-par earnings from top firms such as American Express adding to the downside.
The losses were followed in Asia, with Tokyo down 1.1 per cent by the close, while Hong Kong lost 0.3 per cent in late trade and Shanghai ended down 0.9 per cent.
Sydney eased 0.3 per cent, Singapore was down 0.4 per cent and Seoul was 0.1 per cent lower. There were also losses in Taipei, Manila and Jakarta.
“The concern about global central banks withdrawing from providing further stimulus definitely affects markets across the board, from the US to emerging markets,” Ang Kok Heng, chief investment officer at Phillip Capital Management in Kuala Lumpur, told Bloomberg News.
“That’s why we see some investors selling down their assets. Profit-taking that happened in the US also triggered selling in Asian markets.”
In early European trade London fell 0.2 per cent, and Paris and Frankfurt each dropped 0.3 per cent.