Most Asian markets on Thursday struggled to get a firm footing after February’s volatile start with traders spooked by heavy selling and warnings of more upheaval to come. After a run of almost uninterrupted gains across the globe fuelled by cheap money and optimism about the economy, traders are having to navigate turbulent waters as central banks — led by the Federal Reserve — look to lift borrowing costs.
Last Friday’s strong US jobs and wage growth data, coupled with rising yields on key US Treasury bills, brought an end to the record-setting global rally, sending Wall Street spiralling down before slamming world markets this week. Asia took the biggest hit on Tuesday, with Hong Kong and Tokyo among the worst hit but others also feeling the pinch. And investors have been unable to steady the ship with rebounds on Wednesday and Thursday running out of steam.
Tokyo ended the morning 0.3 percent higher and while Hong Kong was 0.6 percent up — having fallen around eight percent over the previous five sessions — but both gave up most of their early gains. Shanghai fell 0.7 percent and Sydney was 0.1 percent lower while Seoul was flat. Taipei, Wellington and Manila were all lower. But Singapore edged up 0.2 percent and Kuala Lumpur also gained.
While European markets ended sharply higher, on Wall Street all three main indexes sank into the red. “There are a lot of risks ahead and we’ve been lulled into a false sense of security over the last couple of years with central banks keeping rates low for a very long time,” Steve Goldman, Kapstream Capital head and portfolio manager, told Bloomberg TV. Risk assets are going to continue to perform well albeit with a lot more volatility than what we’ve seen in the past.”
Expectations the Fed will hike interest rates more than the three times expected this year has lifted the dollar against high-yielding currencies including the Australian dollar, South Korean won, Indonesian rupiah and South African rand. However, with the European Central Bank tipped to be close to winding in its crisis-era stimulus, the euro has strengthened, while the pound is also being supported by hopes for a positive outcome for Britain’s exit from the EU.
But the greenback was struggling against the yen, which is considered a safe bet in times of uncertainty. Oil prices extended Wednesday’s sharp sell-off on concerns about increasing US production, offsetting an output cap by OPEC and Russia. The dollar’s strength against high-yielding units was also putting a dampener on the market as it makes the commodity more expensive for clients using those currencies. The drop in crude prices again hit energy firms, with CNOOC, PetroChina and Sinopec diving in Hong Kong and Woodside Petroleum sharply lower in Tokyo.
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