Asia stocks sharply lower, following US + Europe sell-off

09.02.2016 04:52

Australian and Japanese markets were sharply lower on Tuesday, after another sell-off in U.S. and European stocks overnight.

Nikkei 225, which halted a four-session decline to close up on Monday, dropped 4.48 percent. The dollar-yen pair was down 0.60 percent at 115.13, falling below the 116-level overnight and marking its lowest levels since November 2014. Japan’s Finance Minister Taro Aso said Tuesday that the yen’s moves were “rough,” adding that he’ll be watching the moves closely, Reuters reported.

The 10-year Japan government bond yield (JGB) essentially hit zero for the first time, likely weighed by safe haven flows. Bond prices move inversely to yields.

Exporters Toyota, Nissan, Honda and Sony were down between 4.53 and 5.62 percent; a stronger yen is a negative for exporters as it reduces their overseas revenue when converted into local currency.

Down Under, the ASX 200 fell 2.27 percent, weighed by sharp drops in the energy, materials and financials sectors, which were down between 1.44 and 3.14 percent respectively.

Many Asian markets remain closed for the Lunar New Year. China and Taiwan are shut for the week, while markets in Hong Kong, Singapore, South Korea, Malaysia and Vietnam are closed shut on Tuesday.

Chris Weston, chief market strategist at spreadbetter IG, sounded an ominous note is his morning epistle, noting that traders off work to celebrate the Lunar New Year would be happy their markets were closed.

“For those who have traded the overnight move, it almost feels like something big is brewing, similar to 24 August and the quasi-flash crash capitulation move we saw,” Weston wrote.

“These markets need a strong shake up and sharp downside move, followed by a wave of buying to settle things down. But until that comes there will be no clarity, absolutely no confidence and a bucket load of concern,” he added. “There’s concern the volatility will feed through into real economics and central banks will be pretty much powerless to stop it.”

NIKKEI Nikkei 225 Index 16228.56
-775.74 -4.56%
HSI Hang Seng Index 19288.17
105.08 0.55%
ASX 200 S&P/ASX 200 4870.20
-105.19 -2.11%
SHANGHAI Shanghai Composite Index 2763.95
-17.07 -0.61%
KOSPI KOSPI Index 1917.79
1.53 0.08%
CNBC 100 CNBC 100 ASIA IDX 5802.89
-125.44 -2.12%

Oil prices continued their volatile run, dropping overnight after a meeting between Saudi Arabia and Venezuela at the weekend ended with few signs of coordination to tackle the global supply glut.

During Asian hours, U.S. crude futures were up 1.89 percent at $30.25 a barrel, after falling 3.88 percent in overnight trade. The global benchmark Brent was up 0.61 percent at $33.08 a barrel, following a 2.85 percent decline during U.S. trading hours.

Energy plays were mostly down, with shares of Santos falling 4.35 percent, Woodside Petroleum down 2.15 percent, Inpex seeing losses of 5.42 percent and Japan Petroleum lower by 4.57 percent.

Spot gold also traded at $1,191.2 an ounce during Asian hours. Overnight, gold futures for April delivery surged 3.47 percent to close at $1,197.90 an ounce, and broke above $1,200 for the first time since June. The precious metal, considered a safe-haven investment during times of market turmoil, also recorded its best trading day since December 2014.

Shares of gold miner Newcrest traded up 8.05 percent, Alacer Gold was up by 7.09 percent, Evolution Mining surged 9.04 percent and Kingsgate was up 8 percent.

Banking stocks in Australia and Japan were off, following the tumble seen among banks in Europe and the U.S.

Australia’s so-called big four banks, ANZ, Commonwealth Bank of Australia, Westpac and NAB, were down between 2.20 and 3.86 percent.

Japanese banking stocks were also down as concerns persist over their profitability after the central bank introduced negative interest rates in the market in late January. Shares of Mitsubishi UFJ were down 7.10 percent, SMFG fell 6.42 percent and Mizuho Financial slipped 5.23 percent.

It did not help to assure markets after policymakers at the Bank of Japan tussled over the decision to adopt negative interest rates, raising concerns ahead of a close vote, according to the official summary released Monday.

“I am concerned that the Bank’s introduction of a negative interest rate could lead to a competition with central banks in other countries, which already have adopted negative interest rates, to lower interest rates deeper into negative territory,” one member said, according to the summary of opinions at the monetary policy meeting.

Overnight, Goldman Sachs was one of the top losers on the Dow Jones industrial average, falling 4.61 percent.

In Europe, banking stocks also declined with Italy’s UniCredit down 6 percent, Banca Monte dei Paschi di Siena slumping some 12 percentafter receiving a cut to its stock price target from JPMorgan and Exane BNP Paribas, and Intesa SanPaolo down by 5 percent. In the U.K., shares of HSBC were down 4 percent and Barclays temporarily suspended trading during Monday due to outsize moves before eventually closing 5.3 percent lower.

Elsewhere, analysts are also concerned that banks will face a tough earnings environment.

In the U.S., Citigroup lowered its earnings forecasts for U.S. banks, citing in part its expectations the Federal Reserve isn’t likely to raise rates this year as financial conditions are already tightening. It’s now assuming the Fed funds rate normalizes around only 1.5 percent, which will weigh on net interest margins for U.S. banks.

“If this view of flat rates materializes, it will be a very tough environment for spread lenders,” Citi said in a note Monday. “We see low single digit net interest revenue growth over the next couple years as the net interest margin will likely step down as longer duration books reprice.”

Major U.S. indexes closed more than 1 percent lower; the Dow Jones industrial average fell 177.92 points, or 1.1 percent, to 16,027.05. TheS&P 500 closed 26.61 points, or 1.42 percent, lower at 1,853.44 and theNasdaq composite slid 79.39 points, or 1.82 percent, to close at 4,283.75.

In Europe, the pan-European Stoxx 600 was down 3.5 percent and the German DAX closed 3.3 percent lower, with banks and automobile stocks selling off on fears the European Central Bank may cut interest rates further into negative territory, following in the footsteps of the Bank of Japan, which surprised markets at the end of January by setting the country’s first negative interest rates.

— CNBC’s Leslie Shaffer and Jenny Cosgrave contributed to this report.


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