Asia stocks slip as ECB reversal rattles markets

A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan January 7, 2019. — Reuters pic
A man looks at an electronic board showing the Nikkei stock index outside a brokerage in Tokyo, Japan 7, 2019. — Reuters pic

SYDNEY, March 8 — Asian stocks were headed for harm today after the European slashed its growth forecasts and launched an emergency round of policy stimulus, leaving investors fearing the worst for the global economy.

ECB President Mario Draghi said the economy was in “a period of continued weakness and pervasive uncertainty” as he pushed out a planned rate hike and instead offered banks a new round of cheap loans.

The reversal came in the same week that Canada’s central bank took a sudden dovish turn and dismal data from Australia to the UK instilled a sense of foreboding in markets.

“When central banks surprise like this some investors wonder whether that infers things are much worse than they thought,” said Gavin Friend, a senior market strategist at NAB.

“Our initial take is these developments are pressing down on market confidence, seen in lower yields and .”

Yields on German and French 10-year bonds dived to their lowest since 2016, while stocks took a beating. The euro duly sank to depths last seen in mid-2017, sending the safe-haven and yen surging.

In Asia, Nikkei futures were pointing to an opening loss of around 1.6 per cent, while the Australian market was off 0.4 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent in early trade.

E-Mini futures for the S&P 500 nudged down 0.04 per cent, adding to losses on Wall Street.

The Dow fell 0.78 per cent, while the S&P 500 lost 0.81 per cent and the Nasdaq 1.13 per cent. The closely watched Dow Jones Transport Average fell for a 10th straight session, the longest streak since February 2009.

Euro in a hole

The next hurdle for investors will be US payrolls data for February, with analysts uncertain how much payback there might be for January’s outsized jump. There was also a chance the jobless rate could fall by more than forecast given the recent strength in employment.

The numbers are still likely to highlight the relative outperformance of the US economy, especially against the European Union, and further encourage dollar bulls.

The greenback reached a new 2019 high against a basket of currencies and was last at 97.610.

The euro cowered at US$1.1193, having suffered its biggest one-day loss against since June 14, 2018 when the ECB last pushed back plans for a rate hike.

The euro also shed over 1 per cent on the yen to last trade at 124.88 yen, while the Japanese currency was one of the few to hold its own on the dollar at 111.58.

“The ECB’s updated forecasts imply that, at best, growth slowly returns to trend over the next few years, meaning it will be very difficult to get underlying up,” wrote analysts at ANZ in a note.

“Euro interest rates could be at current levels into 2021. That is not good news for euro area banks or the euro.”

In commodity markets, the rise in the US dollar pressured prices, which slipped to US$1,285.45 (RM5,253.40) per ounce.

Oil prices found some support from Opec-led supply cuts and US sanctions against exporters Venezuela and Iran.

US crude was last down 19 cents at US$56.45 a barrel, while crude was up 10 cents at US$66.09. — Reuters

Source: The Malay Mail Online

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