Asian markets turned lower Friday, tracking a sell-off in New York, and capping a volatile week as investors scurry to safety on growing concerns about the state of the global economy.
Dealers have taken their foot off the pedal after a March rally, with analysts saying there is a sense that central banks from Asia to the Americas are running out of options to kickstart world growth.
Last month saw the European Central Bank push interest rates deeper into negative territory in a bid to ramp up lending, a policy adopted by the Bank of Japan in January. Also, the Federal Reserve has lowered its forecasts for raising borrowing costs this year and said did not expect to make any move until after June.
But despite the move to loosen monetary policy, growth remains stubbornly low and experts said the banks' magic could be wearing off.
"We are seeing central bank fatigue," Niv Dagan, executive director at Peak Asset Management LLC in Melbourne, told Bloomberg News.
"We’re definitely moving to a risk-off scenario and there’s been a strong flight to safety. Investors are cautious and are extremely nervous that global central bank intervention won’t actually stimulate growth in the economy."
The glum outlook weighed on buying sentiment. Japan's Nikkei -- which on Thursday rose for the first time after seven straight losses -- ended the morning 0.6 percent lower. Market heavyweight Fast Retailing, operator of the Uniqlo clothing chain, was a big drag on the index as it dived more than 11 percent after forecasting a big profit fall this fiscal year.
- Dollar struggles –
Hong Kong lost 0.8 percent, Shanghai shed 0.9 percent and Sydney lost 0.6 percent. Seoul, Singapore, Manila and Wellington were also sharply lower.
The losses follow big falls in New York where all three main indexes lost one percent or more.
The rush for safe investments has seen the yen soar against the dollar. The greenback, which started the year at 114 yen, sank Thursday in New York to 107.68 yen at one point -- a 17-month low. Analysts are tipping 105 yen as a bottom line.
The US unit edged up slightly Friday but continues to struggle after the Federal Reserve released minutes from its March meeting showing policymakers unnerved by the global slowdown and unlikely to lift interest rates any time soon.
Oil prices bucked the general downtrend, however, as traders look ahead to next weekend's meeting of major producers with hopes a deal to freeze output can be reached. A surprise fall in US stockpiles also provided some much-needed relief.
In morning trade West Texas Intermediate was up 1.7 percent at $37.90 and Brent gained 1.3 percent to $39.95.
- Key figures at 0300 GMT-
Tokyo - Nikkei 225: DOWN 0.6 percent at 15,661.63 (break)
Shanghai - Composite: DOWN 0.9 percent at 2,982.62
Hong Kong - Hang Seng: DOWN 0.8 percent at 20,110.47
Euro/dollar: DOWN at $1.1371 from $1.1372 on Thursday
Dollar/yen: UP at 108.73 yen from 108.35 yen
New York - Dow: DOWN 1.0 percent at 17,541.96 (close)
London - FTSE 100: DOWN 0.4 percent at 6.136,89 (close)