Business

Asia stock markets drop sharply after USA falls

Asia stock markets drop sharply after USA falls

At just above 2.8 percent, the yield on the 10-year Treasury note has risen to its highest level in more than three years, reflecting expectations from bond investors that the Federal Reserve may boost interest rates at a quicker pace than it has been signaling.

The Dow Jones industrial average slipped 1,032 points into the red - a 4.2 per cent drop, while the the S&P and Nasdaq both lost more than 3 per cent.

The 10-year Treasury bond also reached a four-year high of 2.88 percent on Thursday, bringing about concerns of rising inflation.

Traders are still braced for more volatility as they try to figure out if the swings over the past few days are the start of a deeper correction or just a temporary blip in the USA market's nine-year bull run.

The Standard and Poor's Index, the benchmark for many index funds, also shed 100.66 points, or 3.8 percent, to close at 2,581.

Oil prices fell to their lowest in seven weeks amid fears of rising global supplies after Iran announced plans to increase production and U.S. crude output hit record highs. Tokyo's Nikkei 225 lost 2.3 percent and Hong Kong's Hang Seng gave up 3.1 percent.

Another reason the stock market has risen so much over the past year has been the steady growth in corporate profits. The Nasdaq slumped nearly 1%, while the S&P 500 fell modestly. The Dow had a more than 1,100-point difference between its high and low on Tuesday. The travel website's 2018 outlook also disappointed investors.

The Australian share market, and other markets in the Asia-Pacific region, have fallen sharply as investors are again caught up in the turmoil on United States markets.

And it's now in a correction - 10% off its record high just two weeks ago.

The VIX on Tuesday had hit a more than two-and-a-half year high above 50, after trading, on average, below 20 for months.

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The market turmoil follows a prolonged period of booming stock prices with virtually no sharp declines.

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After huge gains over the course of 2017 and a January jobs report that showed significant wage increases, analysts became anxious the Federal Reserve would hike interest rates sooner than expected, causing market volatility as investors looked to lock in gains. The S&P energy index was up over 1 percent, led by Anadarko Petroleum's 5 percent gain and an increase in oil prices.

Dudley, who called the market slump "small potatoes", said the "jury is still out" on the number of rate hikes.

Benchmark U.S. crude oil lost 64 cents, or 1 percent, to $61.15 a barrel in NY. That's good for the economy, but investors anxious it will hurt corporate profits and that rising wages are a sign of faster inflation.

The White House insists that fundamentals of economy are solid. That combination usually carries stocks higher.

Hanesbrands, which makes underwear, T-shirts and socks, reported a smaller profit than investors expected, and its forecast for the current year didn't live up to analysts' estimates either. Many investors justified that by pointing out that interest rates were low and few alternatives looked like better investments.

"We haven't seen interest rates rise like this in a long time", Guerrini said.

In currencies, the dollar clung to its earlier gains against a basket of currencies as Wall Street's major indexes edged up. The euro held steady at $1.2248.


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