Market Rout in Asia Suggests Another Day of Investor Losses

Market Rout in Asia Suggests Another Day of Investor Losses

Wall Street wobbled on Thursday, with stocks swinging between small gains and sharp losses a day after a major sell-off gave markets their worst day in eight months.

Investors are contending with multiple concerns, including rising borrowing costs that could dampen economic growth, to growing tensions between Beijing and Washington. Worries about rising interest rates eased briefly early in the day after a report showing muted inflation helped send yields on government bonds lower.

But the nervousness has begun climbing again by late morning, with the Standard & Poor’s 500-stock index down more than 1 percent. That was on top of a 3.3 percent decline the day before. Should the S. & P. 500, the market benchmark, close lower on Thursday, it would the sixth straight daily decline.

“The global economy and markets are in a delicate situation,” said Carsten Brzeski, chief economist at ING Bank in Frankfurt. “While the status quo is still good, risks are increasing.”

Stocks were hit particularly hard in Asia, where no market was spared in the sweeping sell-off. Stocks in Shanghai, Tokyo, Seoul and Hong Kong dropped 4 percent or more in a punishing trading session.

Europe’s major stock indexes fell less drastically — by about 1.5 percent — because they had already been on a downward trend for several months.

[Is this the time to do something urgent with your investments? Probably not.]

The recent selling reflects a significant change in Wall Street’s mood, which had been ebullient amid strong corporate profits.

But a variety of forces have started to weigh on investors. The Federal Reserve is expected to increase interest rates further, which could raise the cost of borrowing in the United States and around the world.

Christine Lagarde, managing director of the International Monetary Fund, warned on Thursday that if the tensions between the United States and China continued to escalate, “the global economy would take a significant hit.”

“Our strong recommendation,” Ms. Lagarde said at a meeting in Bali, “is to de‑escalate those tensions and to work toward a global trade system that is stronger, that is fairer, and that is fit for purpose and fit for the future.”

Commodity prices also tumbled on Thursday, with the decline in oil prices, for example, weighing on shares of energy producers.

Stocks in China have been declining for months amid signs of economic softness and worries about the impact of President Trump’s trade war. Over the weekend, the People’s Bank of China pumped $175 billion into the economy to help shore it up. Worried about the impact of negative information on its citizens, China has censored negative economic news.

In Shanghai, where the market was already in bear-market territory, stocks closed down more than 5 percent, around their lowest level since November 2014. Some market observers questioned whether the government could step in to stem the losses, as it did in 2015 when a summer stock market rout started a global sell-off.

At that time, the government banned short selling, suspended initial public offerings and prohibited investors who owned more than 5 percent of a stock from selling it. Officials also deployed a “national team” of state-owned financial institutions to buy up stocks and help bolster the market as it tumbled more than 25 percent.

Europe is also vulnerable to a long list of economic risks, including the possibility of a disorderly exit by Britain from the European Union, and the potential for Italy to provoke a new eurozone debt crisis.

Italy’s populist government has drafted a spending plan that would defy European budget rules to fulfill election promises. The market interest rates on Italian bonds have spiked as investors worry that the country may not be able to service its debt, which is equivalent to more than 130 percent of annual economic output.

The yield, or market interest rate, on 10-year Italian government bonds reflected those fears on Thursday, rising as high as 3.61 percent after closing at 3.51 percent on Wednesday.

Alexandra Stevenson reported from Hong Kong, Jack Ewing from Frankfurt, and Matt Phillips from New York.

Read More


Please enter your comment!
Please enter your name here