Stock markets across Asia drop on concerns surrounding global growth

Gladys Abbott
March 10, 2019

Nordea Research discusses its reaction to today's ECB policy outcome in which the central bank announced an easing package consisting of strengthened forward guidance (no rate hike 2019) and new liquidity operations (TLTRO-III).

While the timing of the Lunar New Year made it hard to draw a true signal from the China data noise, the scale of the drop was alarming, especially when coupled with sombre new data from Germany and Norway. Economists had expected exports to drop 4.8%.

The Shanghai Composite Index, the world's best performing stock market in 2019, fell by 4.40 percent as markets closed. MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.1 percent to a two-week trough.

The Bloomberg Dollar Spot Index decreased 0.3 percent, the first retreat in more than a week.

Here are some of their quick reactions as the euro tumbled in reaction to cuts in ECB growth and inflation forecasts, as well as new cheap loans for banks.

Investors have pushed back expectations for a rise in euro zone interest rates to late-2020 from mid-2020 following the European Central Bank's decision to delay the timing of its first post-crisis rate hike.

Yet the cocktail of growth woes and dovish central banks proved a boon for bonds. "We were not expecting something so clear, so soon, and markets were not either, so bond yields are likely to stay low for longer".

The Australian dollar trod water at US$0.7015, having declined 0.9 per cent this week and hitting a two-month trough of US$0.7005 after data showed the economy grew at its slowest pace in two years last quarter.

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Yields on German and French 10-year bonds dived to their lowest since 2016, while banking stocks took a beating. USA investors piled into sovereign debt while in Europe, the yield on the 10-year German bund fell by half from 13 basis points to about 6.5 basis points.

The news saw the euro slip against the U.S. dollar and the Swiss Franc.

"Strong non-farm payrolls results and further positive developments in U.S".

"The ECB's updated forecasts imply that, at best, growth slowly returns to trend over the next few years, meaning it will be very hard to get underlying inflation up", wrote analysts at ANZ in a note.

Spot gold rose 0.6 percent to $1,292.52 per ounce as of 1305 GMT, while USA gold futures gained 0.5 percent to $1,292.90.

Oil prices eased as US crude output and exports climbed to record highs, undermining efforts by producer club OPEC to tighten global markets.

USA crude was last down 38 United States cents at $56.28 a barrel, while Brent crude fell 49c to $65.81.

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