SHANGHAI (Reuters) – Asian stocks tumbled to 20-month lows, S & P futures tumbled sharply, and China's yuan weakened at the end of a turbulent week for the financial markets on Friday, as fears over corporate profits spark continued fears over world trade and investment contributed to economic growth.
A man stands in front of an electronic board showing the Japanese Nikkei average outside a brokerage firm in Tokyo, Japan, on October 25, 2018. REUTERS / Kim Kyung-Hoon
The gloom that shrouded Asia was at odds with a overnight Wall Street boom, underscoring the fragile investor confidence as stocks of tech titans Amazon.com Inc and Alphabet Inc. fell sharply on disappointing earnings after the closing bell.
In Friday's Asian session, S & P E-Mini futures slumped 0.88 percent, preparing for a potentially difficult session for US markets, which had collapsed on Wednesday due to worries about profits and global stocks spinning brought.
MSCI's Asia-Pacific broadest index outside Japan fell 1.04 percent, triggering tiny gains in the first hour, its lowest level since February 2017. A key drop in the Chinese yuan's value was unhelpful, with the attention of the Market focused on slowing down growth in the second largest economy in the world.
David Madden, market analyst at CMC Markets UK, said European equities fell to Asia. The London FTSE is expected to fall by 0.9 percent, the German DAX by 1 percent and the French CAC 40 by 1.2 percent.
"There is no question that the weight of sentiment has increased," said James McGlew, executive director of Argonaut's stock trading in Brisbane, highlighting increasing geopolitical tensions including Brexit and "internal financial tensions" in China.
"All these things have helped make volatility a boiling point … and I do not think people should try to catch the falling knife right now," he said.
The MSCI Asia Index has been hit hard in recent days by its fifth weekly loss – the longest since 2015. It has fallen more than 4 percent this week.
(Chart: China's yuan is closer to 7 per dollar – tmsnrt.rs/2OTZgPu)
Chinese stocks were dragged down in the generally subdued mood, and as the yuan fell above the psychologically important level of 6.96 against the dollar, it reached its lowest level since December 2016 against the dollar.
The blue-chip index fell 0.9 percent and the Shanghai Composite 0.51 percent in afternoon trading.
Chinese stocks were hit this week by volatility and a series of official announcements and measures to support the markets following a recent slump. The fierce sell-off has raised concerns about the risks associated with $ 620 billion in loans.
In Hong Kong, the Hang Seng Index was 1.05 percent lower, while the technology stocks fell 2.94 percent.
Tech companies also fell in South Korea, where the broader market slipped by 1.8 percent. The Kospi had previously reached its lowest level since December 2016.
In Australia, stocks ended at the end of a weekend. The Japanese Nikkei stock index closed 0.4 percent lower after a volatile session, ending the week at 5.98 percent.
Financial markets were unsettled in recent sessions due to concerns about global growth as investors worried about Sino-U.S. friction, a mix of US corporate earnings, Federal Reserve rate hikes and budget deficits in Italy.
A slowdown in China was particularly worrying for policymakers and investors as it hit stock markets from stocks to currencies and commodities. Friday's fresh 22-month low for the yuan contributes to the countless negative factors that anger investors.
Capital Economics analysts issued a cautious comment, suggesting that the S & P 500 Index's upswing on Thursday was only temporary as investors worried about the worsening economic outlook.
"The first and most important (concern) is that the tightening and slowing fiscal stimulus of the Fed will turn the US economy to the worse, and the second is that China's economy will continue to struggle," analysts note for clients.
"As we've been arguing for some time, those worries are likely to get worse over the next twelve months."
Investors will have the opportunity to review US economic momentum on Friday when the government releases GDP data for the third quarter.
ANZ analysts highlighted weak US data on durable goods, suggesting that "investment is not gaining momentum, not even with the obvious tailwind from tax cuts and the repatriation of US dollars."
"This suggests that the recovery of GDP growth through fiscal stimulus could be quite temporary," the analysts said.
DRAGHI COMMENTS HIT EURO
In the currency markets, the euro eased after Mario Draghi, president of the European Central Bank, said that the Bank's € 2.6 trillion purchase program will end this year and interest rates continue to falter, despite fears over the monetary union's economic situation Summer could rise and political future.
The single currency was 0.1 percent lower at $ 1.1363.
The dollar lost 0.2 percent against the yen at 112.18. The dollar index, which tracks the greenback against a basket of six major competitors, was down 0.05 percent at 96,633.
US Treasury yields fell as equity markets plummeted. The ten-year yield fell to 3.1018 percent against the US closing price of 3.136 percent on Thursday.
Oil prices, after having been signaled by Saudi Arabia's energy minister, have been able to intervene to reduce oil stocks.
US crude fell 1.07 percent to $ 66.61 a barrel. Brent crude fell 0.83 percent to $ 76.25 a barrel.
Spot gold rose 0.07 percent to $ 1,232.44 an ounce. [GOL/]
($ 1 = 0.8794 €)
Reporting by Andrew Galbraith; Additional reporting by Josephine Mason in LONDON; Processing of Sri Navaratnam