Asian markets extend rout as volatility returns


Tokyo money dealers work during an afternoon trade session as a display flashes Tokyo's Nikkei Stock Average in Tokyo, Japan, 9 February 2016. Photo: Kimimasa Mayama/EPA

Asian stock markets took another battering Wednesday, with Tokyo leading another day of sharp losses as investors grow increasingly worried about the world economy and the possibility of a global recession.

As more bourses reopened after the Lunar New Year break, they immediately plunged into the red, playing catch-up with a rout that has seen billions wiped off valuations from Sydney to Frankfurt to New York.

Energy firms were once again in the firing line after oil prices sank below $28 a barrel again, while financial plays are also coming under increasing pressure as investors fret about their bottom lines in the face of the economic slowdown.

The sell-off is the latest in the past six weeks that has seen severe volatility around the world fuelled by China's growth slowdown and a crash in crude prices. The Chicago Board Options Exchange Volatility Index -- which measures market turbulence, is sitting around five-month highs and has jumped 20 percent since Friday.

"Contributing to the drop in oil and certainly having a large impact on the drop in equities is this growing concern about the sustainability of the recovery, the state of economic growth in China and increasingly the state of growth in the US," Russ Koesterich, global chief investment strategist for New York-based BlackRock, told Bloomberg TV.

"People are getting worried about the global recession, worried about growth, which is affecting not only oil and stocks but other risky assets as well."

Japan's Nikkei index lost 2.4 percent by the break, extending the 5.4 percent collapse Tuesday, as the yen climbed against the dollar to levels not seen since late 2014.

Sydney shed 2.2 percent and Singapore, returning from a two-day holiday, sank 2.1 percent while Manila lost more than one percent.

- Energy, financial firms hit –

Among energy plays Sydney-listed Woodside shed 3.5 percent and miner BHP Billiton was almost four percent off. In Tokyo JX Holdings was 2.4 percent off and Inpex eased 1.5 percent.

Their losses came as crude continues to be buffeted by the global supply glut, overproduction and weak demand that has sent it crashing more than 70 percent from mid-2014 highs.

On Tuesday US benchmark West Texas Intermediate slumped almost six percent and Brent lost 7.7 percent after the International Energy Agency warned there was unlikely to be any easing of fundamentals.

Investors are now awaiting the release later Wednesday of the weekly US stockpiles report looking for an idea about demand in the world's top economy and consumer of oil.

Asia's banks were also taking a beating following big losses in their European counterparts as economic fears continue to bite.

Japanese giant Sumitomo Mitsui lost more than two percent and Mitsubishi UFJ lost 3.5 percent. In Singapore UOB lost 2.3 percent while Sydney-listed ANZ was 3.5 percent off and Westpac gave up 2.3 percent.

Investors are keeping a close eye on Federal Reserve chief Janet Yellen's congressional testimony later in the day to see what signals she gives on interest rates. There are hopes she will sound a cautious tone after the turmoil that has ravaged markets this year.

- Key figures around 0230 GMT –

Tokyo - Nikkei 225: DOWN 2.4 percent at 15,699.85 (break)

Sydney - S&P/ASX 200: DOWN 2.2 percent at 4,724.30

Singapore - Straits Times Index: DOWN 2.1 percent at 2,567.91

Euro/dollar: UP at $1.1296 from $1.1293 on Tuesday 

Dollar/yen: DOWN at 114.60 yen from 115.14 yen

New York - Dow: DOWN 0.1 percent at 16,014.38 (close)

London - FTSE 100: DOWN 1.0 percent at 5,632.19 points (close)

© AFP

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