Asian markets tumbled for a second day Wednesday, extending a global retreat, with Tokyo taking a hit from a strong yen after Japan s economy-boosting stimulus programme fell flat with investors.
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Worryingly for energy shares, the broad-based decline in the dollar was still not enough to spare United States crude oil from its first finish under $40 a barrel since April. It fell as low as 100.75 yen, not far from a 3-week trough of 100.680 hit overnight. Australia’s S&P ASX 200 slid 0.8 percent at 5,540.50.
Oil has slumped more than 20 percent from a peak reached in June, with Saudi Arabia cutting crude prices to Asia and further increases in USA drilling rigs sparking Monday’s 3.7 percent tumble. Benchmark gauges in the U.K., France and Italy all fell at least 0.3 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.2 percent in early trading.
The package aims to raise Japan’s GDP by 1.3 percent.
Trading in Hong Kong was suspended for the day as Typhoon Nida swept through the city, shutting down most of the financial hub. Japan’s Nikkei 225 lost 1.5 percent to 16,391.45 as the yen rallied against the dollar. This stimulus is hot on the trail of the Bank of Japan’s major market let down after their last meeting when they delivered a largely modest supplement for their monetary stimulus last week, the disappointment also raised the amount of bull bets on the Japanese stock market as the pace of purchases stood at 6 trillion yen this year.
“Not only was the market well prepared for this but after successive recessions and prolonged bouts of deflation over the past 25 years, it is hard for the market not to greet each fiscal package with scepticism”. “Skepticism that the EBA bank stress tests painted a far too rosy picture of the health of Europe’s banks while paying no account of the current negative rate environment nor for that matter the fiscal health of Portuguese and Greek banks”, Hewson said. “Coordination still seems a good way off”.
The stimulus spending is part of a renewed government effort to coordinate its policy with the Bank of Japan, but growing concerns that the BOJ policy has reached its limit triggered the worst sell-off in government bonds in three years. It cited such possibilities as a decline in Japanese government bond market liquidity becoming structural, triggering higher volatility in bond yields.
The recent spate of weaker US data has further pushed back expectations for when the Federal Reserve might hike its rates – the market is not fully priced for a move until 2018 – and taken a heavy toll on the dollar.
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The dollar was down 0.1 percent at 102.31 yen JPY= , while the euro was 0.1 percent higher at $1.1172 EUR= . It recorded its biggest decline in three months last week and has since struggled to recover.
