https://www.scmp.com/business/money...kets-tumble-us-federal-reserve-cuts-benchmark
Money / Stock Talk
Dow Jones index plunges, following Asia’s equity blood bath as US Fed makes second surprise rate cut to stave off recession
Deb Price and Zhang Shidong in Shanghai
Published: 10:26am, 16 Mar, 2020
Updated: 11:58pm, 16 Mar, 2020
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Traders at the New York Stock Exchange (NYSE) on March 9, 2020. Photo: Xinhua
The Dow Jones Industrial Average followed Asia-Pacific markets into a global rout on Monday as China’s dismal economic data added to rising concerns that the coronavirus pandemic is pushing the world to the cusp of a global recession, after the US Federal Reserve made its second emergency rate cut in two weeks.
The
virus’ damage to China’s economy
was underscored by data showing industrial production, retail sales and asset investment all declined in the January-to-February period far more than analysts expected. It was the first decline on record.
Worries were also escalating that the US, the world’s largest economy, could fall into a recession, as well as other parts of the world. The Dow Jones Industrial Average plunged by more than 10 per cent when trading began.
“The virus outbreak is still getting worse, and it’s difficult to predict the turning point of the stock markets,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
Hong Kong’s Hang Seng Index closed down 4 per cent at 23,063.57. At one point, it traded below 23,000,at 22,842.25. It was its sixth close with losses out of the past seven sessions.
Mainland China’s Shanghai Composite Index fell 3.4 per cent in its biggest decline since February 28. (For in-depth coverage of Hong Kong and China markets, see the
Stocks Blog
.)
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“I think [investors] are driven by the Fed’s unexpected rate cut and also dismal [China] economic data,” Wen said. “Both factors further increased worry over a global recession. For me, the two support levels of HSI will be 23,000 and 21,000.”
The US death toll has climbed to 64, as the coronavirus upends daily life. Huge lines have been seen at US airports as passengers waited in bottlenecks for coronavirus screenings. Churches moved services online. Universities including Harvard shut down and turned to online learning. And the Centers for Disease Control and Prevention recommended cancellation of gatherings of 50 or more people. Anthony Fauci, the leading infectious disease expert, left the door open to a nationwide lockdown.
Hong Kong stocks may remain volatile for months due to Covid-19 pandemic, says analyst Kenny Wen
More than 6,400 people have died worldwide, including 3,199 in mainland China, where the respiratory ailment first broke out.
Coronavirus turns stock markets into the wildest ride on the planet – and it’s not likely to change soon
16 Mar 2020
Australia’s S&P/ASX 200 index tumbled 9.7 per cent while New Zealand’s S&P/NZX 50 Index lost 3.6 per cent.
South Korea’s benchmark fell 3.2 per cent. The Bank of Korea slashed its benchmark interest rate over fears of global slowdown.
The Singapore Straits Times Index fell 4.6 per cent., while Japan’s Nikkei 225 index fell 2.5 per cent.
Taiwan stocks became the latest to fall into a bear market. The Taiex, which fell 4.1 per cent, is in a bear market -- defined as a close at least 20 per cent below a recent high -- for the first time since 2015. That makes China the only stock market in the world’s top 20 with an index not in bear territory, according to Bloomberg.
On Friday, the Hang Seng Index fell into its first bear market since 2015, when mainland China’s stock market melted down. It took two years to dig out.
In the Asia-Pacific region, India, Singapore, Australia, Japan, Thailand, the Philippines and Indonesia are also in bear markets.
“What a day! The shockingly bad economic data from China completely drowned out the Fed,” said Brock Silvers, managing director of Adamas Asset Management. “I thought there would be a bump and then reality. Instead we went straight to reality.”
The
emergency step by the US Fed
cut the main rate a full percentage point, leaving it at zero per cent to 0.25 per cent – the lowest since 2015. It had planned to meet on Tuesday and Wednesday.
The Hong Kong Monetary Authority (HKMA) – the city’s de facto central bank –
moved quickly to cut
its base rate downward to 0.86 per cent from 1.5 per cent with immediate effect. Hong Kong’s currency is tied to the US dollar, and the HKMA moves in lockstep with the US Fed.
The US emergency rate cut called into question whether the US central bank has more room for easing to soothe the financial shock amid the epidemic outbreak, given the benchmark interest rate is already near zero, according to JPMorgan Asset Management.
“The US is seemingly at the very early stages compared to what has played out in some Asian economies. With little economic data to go on it’s not clear just how deep the economic impact will be,” said Kerry Craig, a global market strategist at the money manager. “Our view is that the drag on the services sector from social distancing policies and shock from the fall of the oil price on the energy sector will be enough to tip the US into recession, but not necessarily a long one.”
On Friday, after market close here, China’s central bank cut the reserve requirement ratio for some lenders, releasing 550 billion yuan (US$78.5 billion) into the financial system.
“The Fed has likely fired off its last bazooka,” Stephen Innes, chief market strategist of AxiCorp, a currency trading platform.
“Still, after last week’s risk parity unwind, it isn’t easy to predict which express elevator, up or down, investors will be taken for a ride to the next circuit breaker. Although arguably the path of least resistance may eventually be lower as investors watch in horror as a good chunk of global GDP goes up in flames,” he added in a morning note.
Apple suppliers fell after Apple CEO Tim Cook announced all retail stores outside of China will be closed until March 27 to try to control the spread of the coronavirus.
In China, Goertek fell to the 10 per cent daily limit, as did Luxshare Precision Industry. In Hong Kong, AAC Tech fell 11.6 per cent to HK$40.45.
Meanwhile, ZTE Corp, the Chinese carrier network, plunged 21.9 per cent after NBC reported a new investigation by the US Department of Justice is under way over alleged bribery. The news outlet cited people familiar with the matter. ZTE issued a statement saying it has not been contacted about any new probe. That was its biggest fall since July 2018, according to Bloomberg data.
In Shezhen, ZTE fell by the daily 10 per cent limit.
This article appeared in the South China Morning Post print edition as: US shares tumble at open as global recession fear mounts
Comments
Deb Price
Deb joined the Post in 2018. Formerly an editor at The Wall Street Journal and The Washington Post, she was a Harvard Nieman fellow in 2011. She was the lead writer on The Wall Street Journal's digital project, "No Good Choices," which won the top award for excellence in reporting on women's issues from the Society of Publishers in Asia in 2015.
Zhang Shidong
Zhang Shidong is based in Shanghai and reports on business for the Post. He joined the team in 2017, following stints covering China's stock market news for Bloomberg and at a local newspaper in Shanghai.
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Money / Stock Talk
Dow Jones index plunges, following Asia’s equity blood bath as US Fed makes second surprise rate cut to stave off recession
- Dow Jones index plunged by more than 10 per cent, following a region-wide rout in Asia-Pacific stock markets on Monday, spooked by the US Fed’s second emergency rate cut in as many weeks
- Hang Seng falls 4 per cent; has closed down six of last seven sessions
Deb Price and Zhang Shidong in Shanghai
Published: 10:26am, 16 Mar, 2020
Updated: 11:58pm, 16 Mar, 2020
TOP PICKS
News
Dow has biggest 1-day drop, despite Trump, Fed trying to soothe virus fears
17 Mar 2020
Economy
China’s economy suffers dramatic collapse in warning to rest of world
16 Mar 2020
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19 Mar 2020
[IMG alt="A man walks by a statue of first U.S. President George Washington in New York City on March 12, 2020. Photo: Reuters
"]https://cdn.i-scmp.com/cdn-cgi/image/fit=contain,width=76,format=auto/sites/default/files/styles/237x147/public/d8/images/2020/03/19/us_blog_photo.jpg?itok=KR9u7joa[/IMG]
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Traders at the New York Stock Exchange (NYSE) on March 9, 2020. Photo: Xinhua
The Dow Jones Industrial Average followed Asia-Pacific markets into a global rout on Monday as China’s dismal economic data added to rising concerns that the coronavirus pandemic is pushing the world to the cusp of a global recession, after the US Federal Reserve made its second emergency rate cut in two weeks.
The
virus’ damage to China’s economy
was underscored by data showing industrial production, retail sales and asset investment all declined in the January-to-February period far more than analysts expected. It was the first decline on record.
Worries were also escalating that the US, the world’s largest economy, could fall into a recession, as well as other parts of the world. The Dow Jones Industrial Average plunged by more than 10 per cent when trading began.
“The virus outbreak is still getting worse, and it’s difficult to predict the turning point of the stock markets,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
Hong Kong’s Hang Seng Index closed down 4 per cent at 23,063.57. At one point, it traded below 23,000,at 22,842.25. It was its sixth close with losses out of the past seven sessions.
Mainland China’s Shanghai Composite Index fell 3.4 per cent in its biggest decline since February 28. (For in-depth coverage of Hong Kong and China markets, see the
Stocks Blog
.)
HK Business Briefing
Get updates direct to your inbox
By registering, you agree to our T&C and Privacy Policy
“I think [investors] are driven by the Fed’s unexpected rate cut and also dismal [China] economic data,” Wen said. “Both factors further increased worry over a global recession. For me, the two support levels of HSI will be 23,000 and 21,000.”
The US death toll has climbed to 64, as the coronavirus upends daily life. Huge lines have been seen at US airports as passengers waited in bottlenecks for coronavirus screenings. Churches moved services online. Universities including Harvard shut down and turned to online learning. And the Centers for Disease Control and Prevention recommended cancellation of gatherings of 50 or more people. Anthony Fauci, the leading infectious disease expert, left the door open to a nationwide lockdown.
Hong Kong stocks may remain volatile for months due to Covid-19 pandemic, says analyst Kenny Wen
More than 6,400 people have died worldwide, including 3,199 in mainland China, where the respiratory ailment first broke out.
Coronavirus turns stock markets into the wildest ride on the planet – and it’s not likely to change soon
16 Mar 2020
Australia’s S&P/ASX 200 index tumbled 9.7 per cent while New Zealand’s S&P/NZX 50 Index lost 3.6 per cent.
South Korea’s benchmark fell 3.2 per cent. The Bank of Korea slashed its benchmark interest rate over fears of global slowdown.
The Singapore Straits Times Index fell 4.6 per cent., while Japan’s Nikkei 225 index fell 2.5 per cent.
Taiwan stocks became the latest to fall into a bear market. The Taiex, which fell 4.1 per cent, is in a bear market -- defined as a close at least 20 per cent below a recent high -- for the first time since 2015. That makes China the only stock market in the world’s top 20 with an index not in bear territory, according to Bloomberg.
On Friday, the Hang Seng Index fell into its first bear market since 2015, when mainland China’s stock market melted down. It took two years to dig out.
In the Asia-Pacific region, India, Singapore, Australia, Japan, Thailand, the Philippines and Indonesia are also in bear markets.
“What a day! The shockingly bad economic data from China completely drowned out the Fed,” said Brock Silvers, managing director of Adamas Asset Management. “I thought there would be a bump and then reality. Instead we went straight to reality.”
The
emergency step by the US Fed
cut the main rate a full percentage point, leaving it at zero per cent to 0.25 per cent – the lowest since 2015. It had planned to meet on Tuesday and Wednesday.
The Hong Kong Monetary Authority (HKMA) – the city’s de facto central bank –
moved quickly to cut
its base rate downward to 0.86 per cent from 1.5 per cent with immediate effect. Hong Kong’s currency is tied to the US dollar, and the HKMA moves in lockstep with the US Fed.
The US emergency rate cut called into question whether the US central bank has more room for easing to soothe the financial shock amid the epidemic outbreak, given the benchmark interest rate is already near zero, according to JPMorgan Asset Management.
“The US is seemingly at the very early stages compared to what has played out in some Asian economies. With little economic data to go on it’s not clear just how deep the economic impact will be,” said Kerry Craig, a global market strategist at the money manager. “Our view is that the drag on the services sector from social distancing policies and shock from the fall of the oil price on the energy sector will be enough to tip the US into recession, but not necessarily a long one.”
On Friday, after market close here, China’s central bank cut the reserve requirement ratio for some lenders, releasing 550 billion yuan (US$78.5 billion) into the financial system.
“The Fed has likely fired off its last bazooka,” Stephen Innes, chief market strategist of AxiCorp, a currency trading platform.
“Still, after last week’s risk parity unwind, it isn’t easy to predict which express elevator, up or down, investors will be taken for a ride to the next circuit breaker. Although arguably the path of least resistance may eventually be lower as investors watch in horror as a good chunk of global GDP goes up in flames,” he added in a morning note.
Apple suppliers fell after Apple CEO Tim Cook announced all retail stores outside of China will be closed until March 27 to try to control the spread of the coronavirus.
In China, Goertek fell to the 10 per cent daily limit, as did Luxshare Precision Industry. In Hong Kong, AAC Tech fell 11.6 per cent to HK$40.45.
Meanwhile, ZTE Corp, the Chinese carrier network, plunged 21.9 per cent after NBC reported a new investigation by the US Department of Justice is under way over alleged bribery. The news outlet cited people familiar with the matter. ZTE issued a statement saying it has not been contacted about any new probe. That was its biggest fall since July 2018, according to Bloomberg data.
In Shezhen, ZTE fell by the daily 10 per cent limit.
This article appeared in the South China Morning Post print edition as: US shares tumble at open as global recession fear mounts
Comments
Deb Price
Deb joined the Post in 2018. Formerly an editor at The Wall Street Journal and The Washington Post, she was a Harvard Nieman fellow in 2011. She was the lead writer on The Wall Street Journal's digital project, "No Good Choices," which won the top award for excellence in reporting on women's issues from the Society of Publishers in Asia in 2015.
Zhang Shidong
Zhang Shidong is based in Shanghai and reports on business for the Post. He joined the team in 2017, following stints covering China's stock market news for Bloomberg and at a local newspaper in Shanghai.
China stock market
Hang Seng Index |
Coronavirus outbreak |
Quantitative Easing
Read more
Hang on for wild ride as stocks stay volatile amid Covid-19
Read more
Hong Kong slashes interest rate after US Fed’s second emergency cut
Business / Markets
Coronavirus turns stock markets into the wildest ride on the planet – and that’s not likely to change soon
- US Fed moves this morning to cut interest rates to near zero, boost bond holdings by US$700 billion; US futures plunge
- US$7.7 trillion was wiped out in global market capitalisation last week
Yujing Liu , Deb Price and Zhang Shidong
Published: 7:30am, 16 Mar, 2020
Updated: 11:02am, 16 Mar, 2020
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