Stock markets under siege as US rates fears intensity

HONG KONG – Asian trading floors were a sea of red once again on Friday as the global rout returned with a vengeance on intensifying fears about tighter US interest rates. Hong Kong, Tokyo and Shanghai were among the worst hit as they plunged between 3% and 4% while investors piled into safe heaven assets such as gold and the yen.

The sell-off followed another battering for Wall Street, where the Dow suffered the second fall out on record- the worst coming on Monday- after key US Treasury bond yields spiked, fuelling the prospect of higher borrowing costs.

“There’s some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades,” said Doug Cote, chief market strategist at Voya Investment Management.

“They could be in full panic mode right now.” he added.
The Nikkei is now at levels not seen since mid-October, Hong Kong is on course to wipe out its 2018 gains and Shanghai is around a seven-month trough.

A lot of analysts are upbeat about the future owing to healthy economic conditions in the US and global economies, as well as the positive outlook for corporate earnings after Donald Trump’s massive tax cuts in December.

The record high US output figure “suggests that it is now possible to ramp up production even higher quiet soon” which would be negative for a market trying to soak up excess supplies to balance them with demand, said Sukrit Vijayakar of Trifecta Consultants.

Photo Credit- Naharnet

 

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