Japanese stocks plunge 4% after Wall St sell-off

  • Japanese stocks plunge 4% after Wall St sell-off

Japanese stocks plunge 4% after Wall St sell-off

Asian markets struggled to perform as investors tried to get rid of stocks due to fall in the United States on the background of anticipation of higher interest rates.

The last time the Nikkei posted an intra-day loss of over 1,200 points was in June 2016.

It comes after the Dow Jones Industrial Average suffered its worst drop in more than six years on Monday.

Investors are increasingly spooked that global interest rates are heading higher, bringing the long era of loose monetary policy and easy money to a close.

US stocks swooned Friday and Monday as investors anxious that accelerating inflation and higher interest rates could derail the market's record-setting rally. "The speed at which we are doing it is not normal", said Michael Purves, chief global strategist at Weeden & Co in NY.

The market's slump began on Friday as investors anxious that creeping signs of higher inflation and interest rates could derail the market's record-setting rally.

Minutes after the European markets opened, there were sharp declines across most sectors in a morning sell-off.

Hong Kong saw its Hang Seng Index plummet by 5.1 per cent to close at 30,959.42 marking the biggest points drop since July 2015 during mainland China's market rout.

Apart from this, South Korea's Kospi index was down 2.6% and Australia's S&P/ASX 200 fell 3%.

But a massive fall in share prices prompted an about-turn, and in Asian trade on Tuesday, it fell back to as low as 2.662 per cent.

What happened in the US? The Dow Jones Industrial Average posted a record intra-day loss of more than 1,500 points, in response to a spike in long-term USA interest rates.

The benchmark S&P 500 fell 4.1 per cent and the Dow 4.6 per cent, suffering their biggest percentage drops since August 2011 as a long-awaited pullback from record highs deepened.

The Dow Jones industrial average rose as much as 510 points.

The White House moved to reassure investors saying it was focused on "long-term economic fundamentals, which remain exceptionally strong".

Still, investors appear to be reacting to developments in the United States, and the global economy as a whole, amid fears of higher borrowing costs.

"This isn't a collapse of the economy". The index calculation will be freefloat-adjusted market-value-weighted with a 10 percent cap on individual constituents, it said. "This is concern that the economy is actually doing much better than expected and so we need to re-evaluate".

Fed fund futures are now pricing in only two rate hikes this year.

"Global growth is good and likewise company earnings are good, so I think the sell-off will just prove to be a pullback - everyone had been expecting a sell-off at some point so it may continue a little while yet though".

Asian markets, on the other hand, have benefitted from record low USA interest rates in the last decade because money has flowed into Asia in search of stronger returns.