Singapore: The global equity rout continues unabated in the last week of the year, with Japan’s Nikkei 225 Stock Average sliding into a bear market following a 5 per cent drop on Tuesday. This has widened the decline since the October 2 peak to 21 per cent, clearly taking its cue from the S&P 500’s worst trading session before the Christmas holiday.
Chinese shares, the other major Asian market open on Tuesday, also declined as investors shrugged off a pledge by the government to do more to support companies.
Investors looking to Washington for signs of stability that might bolster confidence instead got further unnerved on Monday. President Donald Trump blasted the Federal Reserve, blaming the central bank for the three-month equity rout days after Bloomberg reported he inquired about firing the chairman, while Treasury Secretary Steven Mnuchin sought to assuage rising anxiety with a hastily called meeting of top financial regulators.
“The Trump bubble, which has brought gains in US stocks and the dollar, is collapsing,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. “The more stocks fall, the more investor sentiment gets worse, so there’s more people who need to sell temporarily, such as stop-loss selling.”
The tumult in Washington added to concerns of investors, who have seen equities worldwide tumble on concerns about a slowing US economy, the pace of rate hikes by the Federal Reserve and the ongoing trade war. The S&P 500 plunged almost 3 per cent to end at a 20-month low on Monday.
“It’s just like panic selling,” said Nobuhiko Kuramochi, head of investment information at Mizuho Securities Co. “The equity markets are pricing in concerns over a slowdown in the global economy and a downward revision in corporate earnings in advance. Some investors are reducing their exposure to equities in their portfolio” by increasing cash or bonds.
Japan’s benchmark 10-year bond yield slipped to zero per cent for the first time since September 2017, while the yen advanced for an eighth day, it’s longest rising streak since March 2017, as investors sought haven.
Markets may be overreacting, Japan’s Finance Minister Taro Aso said, adding that he’s not overly worried. Still, an emergency margin call was triggered for the nation’s index futures.
Equities in Shanghai dropped, despite plans by policymakers to improve financing for the private sector and implement tax cuts.