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Asia shares skid, Tokyo down 3.6%, after rout on Wall St

Oct 25 2018 10:28

Shares tumbled in Asia on Thursday, led by declines in semiconductor makers and other technology-oriented shares, after another torrent of selling on Wall Street.

Japan's Nikkei 225 index sank sharply on the open but regained some lost ground, falling 3.7% to 21 267.18. The Shanghai Composite index slipped 1.4% percent to 2 567.92 and Hong Kong's Hang Seng index skidded 2.1% to 24 721.31.

As in New York, losses were heaviest for technology companies. Semiconductor maker Tokyo Electron lost 4% and Taiwan Semiconductor Manufacturing Co dropped 4.4%. South Korea's Samsung Electronics sank 3.8%. Japanese telecoms and energy giant Softbank lost 4.1%.

But other sectors also felt the pain.

Toyota Motor Corp gave up 2.1% while Hong Kong-based retail supply chain giant Li & Fung Ltd lost 2%. Also in Hong Kong, airline Cathay Pacific's shares dropped as much as 6.5% after it said it had discovered a data breach affecting 9.4 million passengers.

Futures trading suggested losses might reverse on the open in New York. The contract for the S&P 500 was up 0.2% at 2 670.80 while that for the Dow Jones Industrial Average edged up less than 0.1% to 24 620.00.

Recent volatility in US markets has weighed on Asian markets for some time, despite relatively strong growth in the region.

"If people are struggling to find a driver I suggest, they wake up and smell the coffee," Stephen Innes of OANDA said in a commentary.

"With the worrisome prospect of US tax cuts having a much shorter shelf life than expected and with the asynchronous global growth sinkhole expanding, equities will have no place to go except into the tank, taking global risk sentiment along with it," he said.

Elsewhere in Asia, South Korea's Kospi fell 2% to 2 053.75 and the S&P ASX/200 dropped 2.2% to 5 701.80. India's Sensex fell 0.7% to 33 781.56. Shares were lower in most markets apart from Indonesia.

Still, some market observers were taking the latest volatility in stride.

"I think the Hong Kong market is really very close to bottom, because when you look at the value, it's very extremely cheap. So how low can it get? Maybe it will reach 24 000 before we find the bottom," said analyst Francis Lun of Geo Securities.

New York trading overnight saw the Nasdaq composite with its hefty roster of tech stocks bear the brunt of the sell-off. It has now fallen more than 10% below its August peak in what Wall Street calls a "correction," losing 4.4% on Wednesday to 7 108.40. That was its biggest drop since August 2011 but it is still up 3% for the year.

The S&P 500 lost 3.1% to 2 656.10 and has lost about 9.4% from its September 20 peak. The Dow tumbled 2.4% to 24 583.42. The Russell 2000 index of smaller-company stocks gave up 3.8% to 1 468.70 and is down 4.4% for the year.

Disappointing quarterly results and outlooks are stoking investors' jitters over future growth in corporate profits. Bond prices rose, sending yields lower as traders sought safe-haven investments.

"Investors are on pins and needles," said Erik Davidson, chief investment officer at Wells Fargo Private Bank. "There has definitely been a change in sentiment for investors starting with the volatility we had last week. The sentiment and the outlook seems to be turning more negative, or at the very least, less rosy."

Investors are increasingly concerned that corporate America's tax cut-fueled earnings growth this year will fade in coming months amid rising inflation, uncertainty over the escalating trade conflict between the US and China and the likelihood of higher interest rates. Recent signs that the housing market is cooling are fueling speculation that US economic growth will start to slow next year.

Bond prices rose, sending the yield on the 10-year Treasury note down to 3.12% from 3.16% late on Tuesday. The slide in bond yields came as traders sought out lower-risk assets.

Technology stocks and media and communications companies accounted for much of the selling. Banks, health care and industrial companies also took heavy losses, outweighing gains by utilities and other high-dividend stocks.

Most companies that missed earnings expectations or issued cautionary outlooks were punished.

AT&T sank after reporting weak subscriber numbers, and chipmaker Texas Instruments fell 8.2% after reporting slumping demand.

Shares in iRobot plunged 12.3% to $80.49 after the robotics technology company said tariffs will reduce its profitability in the fourth quarter.

United Parcel Service slid 5.5% to $107.93 after the shipping company reported weak international revenue, while the strong dollar and high fuel prices also hurt its results.

About 24% of the companies in the S&P 500 had reported third-quarter results as of Wednesday. Of those, 57% delivered earnings and revenue results that topped Wall Street's forecasts.

High-flying companies like Netflix and Amazon took some of the biggest losses on Wednesday. Netflix gave back 9.4% to $301.83 and Amazon dropped 5.9% to $1 664.20.

AT&T was among the big decliners in the media and communications sector, dropping 8.1% to $30.36 after the communication giant's latest quarterly results fell short of Wall Street's expectations.

Boeing was one of the few gainers on Wednesday. It rose 1.3% to $354.65 after the defense contractor's latest quarterly results topped analysts' forecasts. The company also raised its estimates for the year, citing faster orders for aircraft.

In other trading, benchmark US crude lost 71 cents to $66.11 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday it edged up 0.6% to settle at $66.82 a barrel in New York. Brent crude, used to price international oils, declined 72 cents to $75.45 a barrel.

The dollar weakened to ¥112.04 from ¥112.23. The euro rose to $1.1408 from $1.1393.

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