Investing.com - Asian shares dropped sharply on Monday on a carry-over from a dismal Friday in the U.S. and as sentiment on growth in China took a further hit as further monetary easing remains a question mark.
The Shanghai Composite fell more than 7%, while the Nikkei 225 was down 3.21% and the S&P/ASX 200 eased 3.14%. The Hang Seng index was off 3.65%.
As well, expectations of a weekend deposit reserve rate cut by China failed to materialize.The State Council however over the weekend officially allowed pension funds to be invested in the stock market - which is expected to bring CNY1 trillion in new funds to the market but hasn't helped investor confidence.
The yuan fell slightly against the U.S. dollar in the morning. It was last at 6.3950 against the dollar compared with Friday's close of 6.3887. The PBOC set the yuan fixing at 6.3862 - basically unchanged from Friday's 6.3864.
Later on Monday, Federal Reserve Bank of Atlanta President Dennis Lockhart is to speak with his comments to be closely watched.
Last week, U.S. stocks crashed more than 2% for the second straight session as the Dow Jones Industrial Average fell more than 500 points to enter into correction territory, amid weak Chinese manufacturing data and cascading crude oil prices.
The downturn has exacerbated fears of a global economic slowdown, as markets ranging from the U.K. to China also entered correction after declining by more than 10% this week from recent highs. Stocks around the world have suffered a massive sell-off since Wednesday afternoon when the Federal Open Market Committee rattled markets with the release of relatively dovish minutes from its July meeting, which provided indications that persisting weakness in the economy could prompt it to delay an interest rate hike beyond September. Then, on Friday, U.S. crude futures dipped below $40 a barrel for the first time since 2009, while the Flash China Caixin PMI fell to a six and a half year low, illustrating the continual deceleration in growth throughout the world’s second-largest economy.
The Dow plummeted 530.94 or 3.12% on Friday to 16,459.75, suffering its worst one-day loss in four years. The bearish session marks one of the 20 steepest one-day declines in the history of the Dow. The sharp losses extend Thursday’s sell-off when it fell more than 350 points. As a result, the Dow suffered its worst week since 2011.
The losses were even more severe on the NASDAQ Composite index, which dove 171.45 or 3.52% to 4,706.04, pushing it near correction territory. On the week, the NASDAQ fell approximately 5% as it retreats from the symbolic 5,000 level it has mostly stayed above for the majority of the last five months. The weekly decline was the worst for the NASDAQ in five years, as biotech and semiconductor stocks weighed.
The S&P 500 Composite index, meanwhile, lost 64.84 or 3.19% to 1,970.89, concluding its worst week in more three years. For the week, the S&P 500 fell more than 4.5%, suffering one of its worst five-day periods since 2011. During Friday’s session, all 10 sectors closed in the red as stocks in the technology, energy and health care industries lagged. In total, four of the 10 sectors closed down by more than 3%.