Rout Extends to Asia After U.S. Stocks Plunge: Markets Wrap
(Bloomberg) — Stocks in Asia tumbled after a rout in U.S. equities that deepened late in the day amid concerns the trade war is heating up as financial conditions tighten, dampening the outlook for profits. The yen advanced and Treasuries held gains.
Japan’s Topix index plunged more than 3 percent, set for the biggest drop since March, with Hong Kong stocks also seen lower. Shares in Australia and South Korea slid.
The S&P 500 Index fell the most since February and the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years as equity volatility spiked.
Industrial and construction supplies distributor Fastenal Co. added to the angst that
the trade conflict with China is raising materials costs that will crimp profit
margins, while French luxury goods maker LVMH confirmed China is enforcing
customs rules more strictly.
The dollar dropped as 10-year Treasury yields traded at 3.16 percent.
“Over the course of the last week, the sharp rise in U.S. 10-year yields has
caused investors to suddenly reprice the impact of moving from post-crisis low
yields to a rising rate environment,” Eleanor Creagh, an Australian market
strategist at Saxo Capital Markets in Sydney said in an email.
“We have the global growth engines, price of energy rising, price of money rising and quantity of money falling combined with the ongoing trend of deglobalization
which has started to impact markets and the cracks are showing.”
Just a day before the start of America’s third-quarter earnings season, signs
are mounting that companies might not be able to deliver the runaway growth
that’s bolstered equities so far in 2018. Investors have long fretted that the
trade war would crimp profits, and now a group of companies is warning that is
happening at the same time that rising bond yields make the cost of borrowing
“Earnings are really important because that was part of the concern that
sparked the sell-off,” Darrell Cronk, president and chief investment officer at
Wells Fargo Investment Institute told Bloomberg TV in New York. “The concern
heading into the third quarter earnings season is about how much trade and which has started to impact markets and the cracks are showing.”
Jonathan Golub, Credit Suisse’s chief U.S. equity strategist, says he would
absolutely buy the dip in stocks.
Elsewhere, Wall Street’s “fear gauge,” as the Cboe Volatility Index, or VIX, is
known, soared the most since February.
American crude headed back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast.
Here are some key events coming up:
+ The U.S. Treasury is in the midst of $230 billion worth of debt auctions
+ The IMF and World Bank will hold meetings in Bali from Friday, where
finance chiefs from around the world will gather.
+ A closely watched gauge of U.S. consumer prices probably remained
elevated in September and rose 2.3 percent from a year earlier,
according to forecasts ahead of Thursday’s release.
+ JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. kick off
earnings season for U.S. banks on Friday.
- Japan’s Topix index tumbled 3.3 percent as of 9:09 a.m. in Tokyo.
- Contracts on the FTSE China A50 lost 2.7 percent.
- Futures on Hong Kong’s Hang Seng slid 1.4 percent.
- South Korea’s Kospi index plunged 2.3 percent.
- Australia’s S&P/ASX 200 Index declined 1.8 percent.
- S&P 500 futures dropped 0.1 percent.
- The S&P 500 Index declined 3.3 percent.
- The Nasdaq 100 lost 4.4 percent to the lowest since July 3.
- The yen gained 0.2 percent to 112.10 per dollar after gaining 0.6 percent.
- The offshore yuan traded at 6.9319 per dollar.
- The Bloomberg Dollar Spot Index fell 0.1 percent.
- The Euro bought $1.1540.
- The yield on 10-year Treasuries held at 3.16 percent after falling five basis points.
- Australia’s 10-year bond yield dropped three basis points to 2.72 percent.
- West Texas Intermediate crude added to a 2.4 percent slide, falling 0.8 percent to $72.58 a barrel.
- Gold was little changed at $1,194.41 an ounce.
-R.W.N II, yours in 322.
Banyan Capital Management, LLC (“BCM”) is a publisher, not a registered investment advisor, and nothing in BCM’s newsletter is intended, and it should not be construed, to be investment advice. BCM’s newsletter is for informational use only. Any mention in BCM’s newsletter of a particular security, index, derivative, or other instrument is neither a recommendation by BCM to buy, sell, or hold that security, index, derivative, or other instrument, nor does it constitute an opinion of BCM (or of any of its officers, employees, agents or representatives) as to the suitability of that security, index, derivative or other instrument for any particular purpose. BCM is not in the business of giving investment advice or advice regarding the suitability for any purpose of any security, index, derivative, other instrument or trading strategy and nothing in BCM’s newsletter should be so used or relied upon. BCM is not acting as your financial advisor nor in a fiduciary capacity, with regard to any securities, index, derivative or other instrument referred to in BCM’s newsletter. Also, no representation is made concerning the tax implications in any applicable jurisdiction regarding any securities, index, derivative or other instrument and BCM is not advising you in respect of the tax implications. All opinions and estimates in the newsletters are given as of the date of their publication on the BCM’s website and are subject to change and BCM does not assume any obligation to update the newsletters or to reference any such changes. BCM hereby expressly disclaims any and all representations and warranties that: (a) the content of its newsletters is correct, accurate, complete, reliable or a guaranty of future performance; (b) any of its newsletters will be available at any particular time or place, or in any particular medium; and (c) that any omission or error in any of its newsletters will be corrected. BCM shall not be liable for any errors or omissions made in its newsletters or for any inaccuracies in its assumptions. BCM specifically disclaims liability for any losses or damages (incidental, consequential or otherwise) that may arise from the newsletters and that are either used or relied upon by anyone for any reason, including without limitation, the use of the newsletters in the preparation of any financial books and records. Although from time to time BCM’s newsletter may link to or promote others’ websites or services, BCM is not responsible for and does not control those websites or services. BCM’s newsletter is published and distributed in accordance with applicable United States and foreign copyright and other laws. Without the prior written consent of BCM, no person or entity, directly or indirectly, may copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to create derivative works from, transmit, or in any way exploit all or any part of BCM’s website, its newsletter, or any other material belonging to BCM.Without the prior written consent of BCM, no person or entity, directly or indirectly, may offer all or any part of BCM’s website, its newsletter, or any other material belonging to BCM for sale, nor may any person or entity, directly or indirectly, distribute all or any part of BCM’s website, its newsletter, or any other material belonging to BCM over or by means of any medium.Without the prior written consent of BCM, no person or entity, directly or indirectly, may make all or any part of BCM’s website, its newsletter, or any other material belonging to BCM, available as part of or in connection with another website, whether by hyperlink, framing on the Internet or otherwise. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein.