World stock markets falter after US sell-off

AP and AFP

HONG KONG — Most stock markets sank Tuesday as a big sell-off that began in the U.S. extended around the globe.

Asian and European investor sentiment was dampened after U.S. stocks had their worst day so far this year, with major Wall Street benchmarks all dropping more than 1 percent. Confidence among investors was sapped by a weak U.S. employment report last week even as some analysts blamed severe cold weather and noted that one weak month doesn’t make a trend.

After strong gains in stock markets last year, investors fear that prospects for more gains might be limited in the short-term.

“Equity markets and risk assets in general are having a decidedly shaky start to the year,” Mitul Kotecha, head of global markets research for Asia at Credit Agricole CIB, said in an email. “Worries ahead of fourth quarter earnings releases and perhaps concerns about the economy in the wake of the disappointing U.S. December jobs report weighed on U.S. equities overnight.”

Andrew Sullivan, director of Asian sales trading at Kim Eng Securities, said investors are watching for earnings later today from big U.S. companies such as J.P. Morgan and Wells Fargo.

“I think there’ll be a lot of caution. We’ve had a lot of companies pre-warn ahead of these earnings,” said Sullivan.

Markets have also been perturbed by comments from the president of the Federal Reserve’s Atlanta branch raising the prospect of ongoing reductions in economic stimulus despite the weak jobs report. Dennis Lockhart said Monday he would support further cuts “over the course of this year” if the economy continued to improve.

The Fed has said it will make an initial US$10 billion cut to its US$85 billion of monthly bond purchases that have supported economic recovery by keeping interest rates low.

Germany’s DAX slumped 1.2 percent to 9,398.20 and the FTSE 100 index of leading British companies slipped 0.8 percent to 6,704.29. France’s CAC-40 dropped 1 percent to 4,220.34.

U.S. stocks looked set for a flat open. Dow futures edged less than 0.1 percent lower to 16,207.00 while broader S&P 500 futures gained less than 0.1 percent to 1,815.70.

Asian markets mostly suffered a sell-off on Tuesday after heavy losses on Wall Street fuelled by last week’s worse-than-expected U.S. jobs figures. Tokyo tumbled 3.08 percent, or 489.66 points, to 15,422.40, Sydney slipped 1.51 percent, or 80.1 points, to 5,212.0, Seoul fell 0.15 percent, or 2.85 points, to 1,946.07 and Hong Kong lost 0.42 percent, or 97.48 points, to end at 22,791.28. However, Shanghai finished 0.86 percent higher, adding 17.28 points to 2,026.84. Japan’s Suntory Beverages & Food Ltd. rose 0.3 percent in Tokyo after parent Suntory Holdings Ltd. said it was buying American whiskey maker Beam Inc. in a US$13.6 billion deal.

Kuala Lumpur and Jakarta were closed for public holidays. “The jobs data came in so far below expectations that a sharp knee-jerk market reaction is natural, especially considering how far the dollar has fallen,” Monex market analyst Toshiyuki Kanayama told Dow Jones Newswires. “The selling is unlikely to have a long-lasting effect on market sentiment, but could lead to a more thorough shakeout of what has been a very bullish two-month period.” Gold fetched US$1,249.20 at 1020 GMT compared with US$1,246.29 late Monday.