HONG KONG: Asian markets plunged Monday after a sharp sell-off on Wall Street fuelled by concerns about the global economy and a possible recession in the United States.
There appeared to be very little reaction to news that an investigation found no evidence of collusion between Donald Trump’s election campaign and Russia, which observers said removed some uncertainty from markets, reports AFP.After a broad-based rally since the start of the year built on hopes for China-US trade talks and a more dovish Federal Reserve, dealers have been spooked by signs of a worldwide slowdown.
US and European equities went into reverse Friday as the yield on 10-year Treasury bonds fell below those for three-month notes — the first time this had happened since before the global financial crisis in 2007.
This so-called inverted yield curve shows investors are more willing to buy long-term debt — usually considered higher risk — as they consider the short-term outlook more risky. The yield curve is closely watched since it has inverted prior to recessions in recent decades.
The rush to the 10-year US bond market followed weak manufacturing data out of the US, eurozone giant Germany and France.
That came days after the Fed’s announcement that it was unlikely to lift interest rates this year owing to unease about the US and global economy.
“Realistically, the European data has generally been poor for most of the year anyway, so this in itself isn’t news,” said OANDA senior market analyst Jeffrey Halley.“The US data has been middling, but both confirm what everyone already knew, the global economy is slowing down after a 10-year quantitative-easing-induced bull run,” he added, referring to the massive programme of post-crisis stimulus.
All three main indexes on Wall Street ended sharply down Friday, while London and Frankfurt both finished two percent off.
The losses filtered through to Asia this week. Tokyo was hammered 3.0 percent as the yen, which is considered a safe haven in times of turmoil, held on to Friday’s advance against the dollar.
Hong Kong and Shanghai both closed two percent off, while Sydney shed 1.1 percent, Singapore dropped 1.4 percent and Seoul sank 1.9 percent.
There was also heavy selling in Wellington, Manila, Taipei and Jakarta.