Wall Street, Asian share markets troubled

Wall Street suffered its worst drubbing in eight months just as Asian share markets sank in a sea of red on Thursday.

 

The situation has caused a conflagration of wealth that could threaten business confidence and investment across the globe.

 

It also raised the stakes for U.S. inflation figures due later on Thursday as a high outcome would only stoke speculation of more aggressive rate hikes from the Federal
Reserve.

 

Dealers could find no single trigger for the scare, more a confluence of factors.

 

“Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all
driving uncertainty,” summed up analysts at ANZ.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 2.7 percent to its lowest in 18 months.

 

Japan’s Nikkei fell 3.4 percent, the
steepest daily drop since March, while the broader TOPIX lost around
$195 billion in market value.

 

Shanghai shares touched their lowest since late 2014, while China blue chips slid 3 percent.

 

On Wall Street, the S&P500’s sharpest
one-day fall since February wiped out around $850 billion of wealth as
technology shares tumbled on fears of slowing demand.

 

The S&P 500 ended Wednesday with a
loss of 3.29 percent and the Nasdaq Composite 4.08 percent, while the
Dow shed 2.2 percent.

 

The blood letting was bad enough to
attract the attention of U.S. President Donald Trump, who pointed an
accusing finger at the Fed for raising interest rates.

 

“I really disagree with what the Fed is
doing,” Trump told reporters before a political rally in Pennsylvania.
“I think the Fed has gone crazy.”

 

It was hawkish commentary from Fed policy
makers that triggered the sudden sell off in Treasuries last week and
sent long-term yields to their highest in seven years.

 

The surge made stocks look less attractive compared to bonds while also threatening to curb economic activity and profits.

The shift in yields is also sucking funds
out of emerging markets, putting particular pressure on the Chinese
yuan as Beijing fights a protracted trade battle with the United States.

 

China’s central bank has been allowing
the yuan to gradually decline, breaking the psychological 6.9000 barrier
and leading speculators to push the dollar up to 6.9380.

 

That has forced other emerging market
currencies to weaken to stay competitive, and drawn the ire of the
United States which sees it as an unfair devaluation.

 

“The yuan has already weakened
significantly, to offset the tariffs announced so far,” said Alan
Ruskin, Deutsche’s global head of G10 FX strategy. “Further weakness
could exacerbate concerns of a self-fulfilling flight of capital,
and a loss of control.”

There was also a danger for the U.S. if Beijing had to intervene heavily to support the yuan.

 

“China buying yuan and selling dollars
would likely entail some selling of U.S. Treasuries at a point where the
market is showing some vulnerability, and could be very vulnerable to
signs of China liquidation,” added Ruskin.

 

The dollar was already losing ground to
both the yen and the euro, as investors favored currencies of countries
that boasted large current account surpluses.

 

The euro pushed up to $1.1535 and away
from a low of $1.1429 early in the week. The dollar lapsed to 112.20
yen, a telling retreat from last week’s 114.54 peak.

 

That left the dollar at 95.4397 against a basket of currencies. [USD/]

 

In commodity markets, gold struggled to get any safety bid and edged down to $1,192.92.

 

Oil prices skidded in line with U.S.
equity markets, even though energy traders worried about shrinking
Iranian supply from U.S. sanctions and kept an eye on Hurricane Michael,
which closed some U.S. Gulf of Mexico oil output.
[O/N]

 

Brent crude fell 76 cents to $82.33 a barrel, while U.S. crude dropped 68 cents to $72.49.