BEIJING — Stock markets in Asia dropped sharply Thursday morning, with investors from Australia to Japan and everywhere in between reacting to the sell-off in U.S. markets triggered by fears of that rising interest rates will lead to slower growth in the world’s largest economy.
The sharp falls across Asia were “no worse than anticipated,” analysts said.
Australia’s benchmark ASX 200 dropped almost 2 percent immediately after opening in Asia Thursday morning. Others followed suit upon their openings, with Japan’s Nikkei and Topix, the Hong Kong Hang Seng Index, then Shanghai Composite Index and the Shenzhen Component Index all losing more than 3 percent.
But the Taiwan Benchmark Index fared the worst, plummeting almost 5 percent to a 16-month low.
“With most Asia equity markets now open, it’s looking bleak — albeit only as expected and no worse,” wrote Mark Cudmore, a Singapore-based macro strategist for Bloomberg.
The Dow Jones industrial average dropped more than 800 points in trading on Wednesday, one of the worst sell-offs since February as traders rushed to sell stocks that have been driving the U.S. economy. Netflix was down more than 8 percent, Amazon was off 6 percent, and Apple and Google were both down more than 4.5 percent.
This reflected investor concern that the Federal Reserve will continue to raise interest rates and that this will slow economic growth and make borrowing more expensive for the U.S. government, as well as businesses and consumers.
“The U.S. market sell-off last night spooked sentiment and rekindled memories of similar trading sessions at the beginning of this year,” Medha Samant, investment director for Asian equities at Fidelity International, wrote in a note on Thursday morning, according to the Financial Times. “[It is] likely that this negative sentiment could roll over to the Asian markets in the short term,” she wrote.
[Dow drops over 800 points as investors fear rising rates ]
President Trump on Wednesday strongly criticized the Fed for tightening rates, again signaling that he wanted interest rates to remain low.
“The Fed is making a mistake. They’re so tight. I think the Fed has gone crazy,” he told reporters while traveling in Pennsylvania Wednesday. “It’s a correction that we’ve been waiting for, for a long time. But I really disagree with what the Fed is doing, okay?”
Jitters were already running high, thanks to the trade war between China and the United States, which is showing no signs of being resolved any time soon.
There were more signs of tension in the China-U.S. economic relationship.
Treasury Secretary Steven Mnuchin warned China against “competitive devaluation” of its currency against the U.S. dollar as the trade war escalates.
The Chinese renminbi had fallen “significantly” during the year and the Treasury Department is monitoring this “very carefully” to make sure China wasn’t manipulating its currency to gain an advantage in the trade war, Mnuchin told the Financial Times in an interview.
He said he wanted to discuss the currency with Beijing as part of the trade talks. “As we look at trade issues there is no question that we want to make sure China is not doing competitive devaluations,” he told the business newspaper.
Separately, the Treasury Department issued new rules on foreign investments into American companies, strengthening its power to block them on national security grounds. China has been the main target for these rules.
This ongoing friction is likely to suppress markets for some time, analysts said.
“As uncertainty continues to prevail in financial markets across the world, many investors are staying on the sidelines until more clarity emerges in U.S. Treasury and Chinese markets,” said Yasuo Sakuma, chief investment officer at Libra Investments, according to Reuters.
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