HONG KONG: Asian and European stocks tumbled Monday, extending last week’s global sell-off as comments from top central bankers rang alarm bells on trading floors that the days of cheap money could be numbered.
Regional investors followed their US and European counterparts in heading for the exit after two Federal Reserve officials on Friday lent their support to a hike in US interest rates as soon as this month.
Boston Fed President Eric Rosengren said higher rates were needed to prevent the economy from overheating, while normally dovish Governor Daniel Tarullo also signalled his openness to a 2016 increase in a television interview.
“There is a consistent undertone building among the Fed Board that delaying rate hikes will hinder rather than assist the economic recovery,” Stephen Innes, senior trader at OANDA, said.
Their remarks came a day after the head of the European Central Bank played down the chances of fresh stimulus, while Japanese officials have also refused to give concrete assurances about new measures.
They also came as a surprise to markets after a string of below-par readings on the economy — including service sectors activity and jobs growth — had put off expectations of any tightening to December at the earliest. Tokyo stocks were down 1.7 percent and Shanghai finished 1.9 percent lower, while Hong Kong ended 3.4 percent down after Friday’s 13-month high close.
Sydney and Wellington each gave up more than two percent, while Seoul gave up 2.3 percent with market heavyweight Samsung Electronics slumping seven percent on the back of the crisis over exploding batteries in its flagship Note 7 device.
In early European trade London tumbled 1.3 percent, Frankfurt dived 1.8 percent and Paris retreated 1.7 percent.
“Central banks are reluctant to add additional stimulus and that’s causing a lot of concern,” Niv Dagan, executive director at Peak Asset Management LLC, told Bloomberg Radio. “We expect additional downside in the near term.”
– Samsung plunges –
With the odds on a US rate hike increasing, the dollar rose against the yen, pound and euro Friday but edged down Monday.
However, it rallied against higher-yielding, riskier currencies. It soared more than one percent against the South Korean won and 0.8 percent versus Malaysia’s ringgit, while also racking up big gains on the Australian dollar and Indonesian rupiah.
Oil prices tumbled for a second successive day after Friday’s sharp losses as relief at news of a huge fall in US inventories was replaced by warnings that it was likely a one-off caused by lower imports.
West Texas Intermediate fell 81 cents to $45.07, having shed $1.74 Friday, while Brent tumbled 72 cents to $47.29, extending a $1.98 drop at the end of last week.
In Seoul, Samsung Electronics took a hit after US regulators warned people not to use the company’s Note 7 because of the risk of its battery exploding. Samsung SDI, which makes the batteries, ended almost six percent lower.
Samsung last week suspended sales of the new flagship smartphone and announced a recall of 2.5 million units after the faulty batteries caused some handsets to blow up when charging. Several airlines have banned the use of the gadget on their flights owing to fears for the safety of their passengers.
Samsung has lost about a tenth of its market capitalisation in Seoul since the warning.
– Key figures around 0800 GMT –
Tokyo – Nikkei 225: DOWN 1.7 percent at 16,672.92 (close)
Shanghai – Composite: DOWN 1.9 percent at 3,021.98 (close)
Hong Kong – Hang Seng: DOWN 3.4 percent at 23,290.60 (close)
London – FTSE 100: DOWN 1.3 percent at 6,690.12
Euro/dollar: UP at $1.1251 from $1.1232 late Friday
Pound/dollar: UP at $1.3270 from $1.3268
Dollar/yen: DOWN at 102.55 yen from 102.69
New York – DOW: DOWN 2.1 percent at 18,085.45 (close) —Agencies
