Nervous Asian markets tumbled to their lowest levels in at least six months yesterday as a host of global worries and heavy losses on Wall Street triggered a widespread sell-off.
European stocks fared worse, sinking to one-year lows on renewed fears of a financial crisis.
Dark clouds have been gathering for weeks - sluggish economic data out of Europe and the United States, weaker growth in China, mounting fears over Ebola and a war against Islamic State in Iraq and Syria militants yet to gain much ground.
The potent mix of bad news boiled over on Wednesday, when the US government said producer prices fell last month, for the first time in over a year, owing to falling energy and food prices. Retail sales also fell.
Spooked Wall Street investors bailed out in droves. The main US stock indexes fell more than 2 per cent during the trading session but ended about 1 per cent lower. "Looking at the bloodbath... you could be excused for thinking Halloween had come along two weeks early," Trustnet Direct market analyst Tony Cross told Agence France-Presse on Wednesday.
Asian investors took their cue from that bleak landscape when they woke up yesterday. Overall, the MSCI Asia Pacific Index fell 1.2 per cent to a six-month low. The battering in Tokyo was especially bad with shares sliding 2.2 per cent, while Hong Kong dropped 1 per cent to its lowest close since late June.
Shanghai slipped 0.7 per cent and Seoul shed 0.37 per cent to an eight-month low.
Singapore's Straits Times Index has now erased all the gains it had made so far this year, sliding 44.51 points, or 1.39 per cent, to 3,154.21.
OCBC economist Selena Ling, in a note yesterday, highlighted eight factors worrying investors, from fears that the US Federal Reserve might raise interest rates too early to concerns that Ebola might spread to Asia.
"Is the US economy due for another slowdown again? This remains a valid question at this juncture," she said, citing the drag from a strong US dollar and euro zone woes as contributors.
Economists are increasingly alarmed over the euro zone, she said, "with even the prospect of an outright recession if the European Central Bank fails to step up to the plate". European stocks fell to a one-year low, with the benchmark index posting its longest slump in 11 years, as concern grew that a financial crisis is returning to the region's so-called peripheral nations, Bloomberg reported.
Given this maelstrom of worries, analysts expect the correction is likely to last some time, with markets possibly feeling the impact even next year.
"China already had a weak investment piston in its gross domestic product engine. Its property and raw materials industries are suffering. If its export engines slow as well, due to the slowdown in Europe, there would be implications for the rest of Asia," noted CIMB Research analyst Kenneth Ng. "Singapore banks that rely on trade will see less volume. ASEAN economies that supplied commodities to China would see consumers tighten their purse strings and banking non-performing loans would rise."
This article was first published on Oct 17, 2014.
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