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Asia stocks turn sharply lower on China concerns; Nikkei plunges 2%

Published 10/23/2013, 02:48 AM
USD/JPY
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Investing.com - Asian stock markets turned sharply lower during afternoon trade on Wednesday, with shares in mainland China getting slammed amid fresh concerns over tight liquidity conditions.

Regional equities were higher earlier in the day after weaker-than-expected U.S. payrolls data fuelled speculation that the Federal Reserve will delay plans to start reducing stimulus.

During late Asian trade, Hong Kong's Hang Seng Index shed 0.3%, Australia’s ASX/200 Index ended 0.32% lower, while Japan’s Nikkei 225 Index tumbled 1.95%.

Asian markets erased gains amid renewed fears over a cash crunch in the Chinese financial system after interbank lending rates surged.

In Hong Kong, shares of China Construction Bank shed 0.4%, Industrial and Commercial Bank of China was down 0.2%, while Agricultural Bank of China lost 0.5%.

On the upside, gold producers Zijin Mining Group and Zhaojin Mining Industry Company climbed 1.1% and 1.2% respectively as gold prices traded near a four-week high in New York.

Meanwhile, in Tokyo, the Nikkei sold off sharply as the yen strengthened against the U.S. dollar, weighing on sentiment.

USD/JPY fell to hit a session low of 97.25, moving off the previous day’s high of 98.47. A stronger yen reduces the value of overseas income at Japanese companies when repatriated, dampening the outlook for export earnings.

Automakers Mazda and Honda saw shares fall 2.65% and 2.8% respectively, while Sony and Sharp declined 2% and 1.7%.

Japanese megabanks were also lower with shares of the nation’s largest lender Mitsubishi UFJ Financial Group losing 1.55%, while Sumitomo Mitsui Financial Group and Nomura Holdings fell 2% and 1.75% respectively.

Elsewhere, in Australia, the ASX/200 Index retreated from the highest level since May 2008 after official data showed that consumer price inflation rose to 1.2% in the third quarter after a 0.4% reading in the prior quarter. Analysts expected a third-quarter reading of 0.8%.

The stronger-than-expected inflation data reduced expectations of further interest rate cuts by the Reserve Bank of Australia.

The big four banks were mostly lower, with National Australia Bank falling 1.65%, while ANZ Banking Group and Westpac Banking Group declined 0.8% and 0.7%.

Looking ahead, European stock market futures pointed to a lower open.

The EURO STOXX 50 futures pointed to a loss of 0.4% at the open, France’s CAC 40 futures shed 0.5%, London’s FTSE 100 futures indicated a drop of 0.4%, while Germany's DAX futures pointed to a loss of 0.4% at the open.

On Tuesday, the Department of Labor said that the U.S. economy added 148,000 jobs in September, well below expectations for an increase of 180,000. The unemployment rate ticked down to a four-and-a-half year low of 7.2% from 7.3% in August, but this was partially due to more people dropping out of the labor force.

The disappointing data bolstered expectations that the Fed would postpone plans to start scaling back its asset purchase program until at least the beginning of next year.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of global equities.

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