Resources firms led a sell-off in Asian markets on Tuesday following painful losses across Europe & New York as fears approximately the impact of China’s slowing growth on the global economy burst back into view.
In a fierce rush to safety the yen & gold rallied & higher risk emerging market currencies took another hit ahead of the release of key US jobs data that could play a huge part in the Federal Reserve’s decision on when to hike interest rates.
p>Trading floors around the planet have witnessed extreme volatility since mid-August, when China devalued its yuan currency, fanning fears approximately the state of the world’s number two economy & crucial driver of global growth.
“The slowdown in China is spreading to other Asian economies, Brazil & Australia, & weakness in emerging countries could echo throughout the overall world economy,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.
“We still don’t know when market fears will end approximately China’s slowdown, & because of this investors are turning to cash & safe assets.”
China has been suffering a painful slowdown in growth for several months & is expected to see its worst performance this year in a quarter of a century.
Last week already weak confidence was rattled by news that a gauge of factory activity in the country came in at its lowest level for six-and-a-half years in September.
The latest panic comes after China said its key industrial companies saw profits fall 8.8 percent in August — hit by last month’s shock devaluation, weak demand & plunging stocks.
The news hammered London-listed mining giant Glencore (Xetra: A1JAGV – news) , which plunged 27.5 percent on Tuesday after online brokerage Investec (LSE: INVP.L – news) warned approximately the impact of soft commodity prices on the group as China’s struggles hit demand for raw materials.
The firm has lost approximately three quarters of its value this year as commodity prices — including copper, iron ore & oil — sit at multi-year lows.
– Rush to safety –
On Tuesday resource-reliant firms tumbled. In Sydney BHP Billiton plunged more than six percent & Rio Tinto (LSE: RIO.L – news) shed five percent, while Origin Energy (Other OTC: OGFGF – news) & Santos (Dusseldorf: STS1.DU – news) gave up almost seven percent each.
In Tokyo oil firm JX Holdings (Other OTC: JXHGF – news) lost 4.5 percent & Kubota — which makes tractors & heavy equipment — fell 5.88 percent. Industrial robot maker Fanuc, which has close links to China, was down 2.38 percent.
The losses dragged all Asia’s bourses lower. Tokyo tumbled 3.21 percent, Hong Kong lost 3.42 percent, Sydney shed 2.69 percent & Shanghai was 1.48 percent lower. Singapore, Wellington & Manila were all down more than one percent.
Markets in New York & Europe were equally as sideswiped. The Dow plunged 1.92 percent, the S&P 500 lost 2.57 percent & the Nasdaq (NasdaqGS: NDAQ – news) tumbled 3.04 percent. Earlier in the day London, Frankfurt & Paris all lost more than two percent.
Bullion, another go-to safe haven, added 0.10 percent to $1,132.72.
Foreign exchange dealers moreover fled to assets considered safe in times of turmoil. The dollar fell to 119.61 yen from 119.93 yen Monday in New York, while the euro slipped to 134.62 yen against 134.83 yen.
The greenback extended gains on other regional currencies. The South Korean won fell 0.18 percent against the US unit, the Thai baht shed 0.25 percent & Indonesia’s rupiah was 0.41 percent lower.
Malaysia’s ringgit was almost one percent lower, the Taiwan dollar shed 0.46 percent & the Singapore dollar eased 0.25 percent.
The dollar is earning extra cache as investors prepare for an expected rate hike by the end of the year, with Friday’s jobs data in focus. A strong reading will put fresh pressure on the Fed to move, putting pressure on emerging economies as investors withdraw their cash to seek better returns in the US.
Oil prices edged up, however, after losing around 2.5 percent Monday.
US benchmark West Texas Intermediate rose 0.16 percent to $44.50 & Brent was up 0.13 percent at $47.40.