Asian markets fall sharply after a steep decline in the Dow
The Dow is down 8.5% from the record high it hit in late January.
Shares tumbled in Asia on Tuesday morning after a wild day for US markets that resulted in the biggest drop in the Dow Jones industrial average in six and a half years.
Japan’s Nikkei 225 index dropped as much as 5.6% in early trading on Tuesday and by midday it was down 5.3% at 21,487.87.
Hong Kong’s Hang Seng index lost 4.4% to 30,819.25 and Australia’s benchmark S&P ASX 200 had fallen 2.9% to 5,852.20.
South Korea’s Kospi declined 2.9% to 2,418.79 and the Shanghai Composite index was off 2.2% at 3,412.37.
The losses in Asia tracked the Dow’s 1,175 point plunge on Monday, its worst point drop of all time and its worst percentage decline since August 2011.
Two days of steep losses have erased the US market’s gains from the start of this year, ending a spate of record-setting calm for stocks.
It's like a kid at a child's party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge. David Kelly
Market professionals have been predicting a pullback for some time, noting that declines of 10% or more are common during bull markets. There hasn’t been one in two years, and by many measures stocks had been looking expensive.
The same is true of many global markets, where investors have been bracing for a correction while hoping not to see one.
“There would be few places to hide from the risk-off atmosphere that is expected to extend its stay in Asian markets today in a significant manner,” Jingyi Pan of IG said. “This is fear rolling over itself,” she said.
Panic in other markets can send investors racing for the “safe haven” of Japanese yen holdings, she added. That is painful for Japanese and other regional export manufacturers, whose competitiveness is hurt by stronger currencies that push their prices relatively higher.
Australian shares shed four months of gains in just morning trading, with all sectors losing ground.
In US trading, banks fared the worst as bond yields and interest rates nosedived. Health care, technology and industrial companies took outsize losses and energy companies sank with oil prices.
After the market’s big gains in 2017 and early 2018, stocks were overdue for a drop, said David Kelly, the chief global strategist for JPMorgan Asset Management.
“It’s like a kid at a child’s party who, after an afternoon of cake and ice cream, eats one more cookie and that puts them over the edge,” said David Kelly, the chief global strategist for JPMorgan Asset Management.
During Monday’s roller-coaster trading on Wall Street, at its lowest ebb, the Dow was down 1,597 points from Friday’s close. That came during a 15-minute stretch where the 30-stock index lost 700 points and then gained them back.
The Dow finished down 4.6% at 24,345.75.
The Standard & Poor’s 500 index, the benchmark most professional investors and many index funds use, dropped 4.1%, to 2,648.94. That was its biggest loss since August 2011, when stocks were reeling as investors were fearful about European government debt and the US had its credit downgraded after the debt ceiling impasse.
As bad as Monday’s drop was, the market saw worse days during the financial crisis. The Dow’s 777-point plunge in September 2008 was equivalent to 7%, far bigger than Monday’s decline.