Asia report: Markets tumble as Fed slashes rates to zero

Markets in Asia finished another tumbling day well into the red on Monday, as investors digested the news that the US Federal Reserve had slashed interest rates to zero overnight.

In Japan, the Nikkei 225 was down 2.46% at 17,002.04, as the safe-haven yen strengthened 1.63% against the dollar to last trade at JPY 105.87.

Of the major components on the benchmark index, automation specialist Fanuc was down 1.99%, fashion firm Fast Retailing lost 0.5%, and technology giant SoftBank Group lost 2.5%.

The broader Topix index was off 2.01% by the end of trading in Tokyo, finishing up its session at 1,236.34.

The Bank of Japan announced new measures to try and support the economy during the session, including the “active” purchase of domestic real estate investment trusts and exchange-traded funds.

On the mainland, the Shanghai Composite was 3.4% lower at 2,789.25, and the smaller, technology-heavy Shenzhen Composite slid 4.82% to 1,712.02.

China released new national urban unemployment figures during the day, with the total hitting 6.2% for the month on February - its highest rate on record.

The figure for 31 major cities reached 5.7% for the month, according to the National Bureau of Statistics.

In other data, fixed asset investment in China plummeted 24.5% year-on-year for the first two months of 2020, with investment in manufacturing plunging 31.5% and that into technology falling 17.9%.

The period was not only affected by the Covid-19 coronavirus outbreak, but also by Beijing’s attempts to curb the virus’s spread, including the extension of the Lunar New Year holiday, which saw much of the manufacturing sector taken offline for a longer period than usual.

South Korea’s Kospi was 3.19% weaker at 1,714.86, while the Hang Seng Index ended 4.03% lower at 23,063.57.

Both of the blue-chip technology stocks were lower in Seoul, with Samsung Electronics down 2.1% and chipmaker SK Hynix down 2.3%.

Investors spent much of the session digesting the emergency rate decision from the Federal Reserve overnight, in which the US central bank slashed its funds rate target to between 0% and 0.25%, from a previous target range of 1% to 1.25%.

Immediately afterwards, stock futures on Wall Street fell off a cliff, rapidly hitting their 5% ‘limit down’ level.

“The Federal Reserve has panicked,” said Neil Wilson, chief market analyst at Markets.com.

“It didn't just fire its bazooka, it dropped an atom bomb of liquidity and monetary stimulus.

“The chaos continues: global equity benchmarks are in full sell-off mode as the near-complete shutdown of Europe gathers pace and markets largely shrug off the Federal Reserve's monetary easing as well as a globally-coordinated central bank effort to ease dollar liquidity.”

Wilson said that, while what the Federal Reserve did was “remarkable”, the global economy was still grinding to a halt.

“No amount of central bank liquidity can contend with that.

“Markets are pricing for 2020 earnings to tumble and for a global recession.

“The kind of damage will be lasting in many sectors, far longer lasting than the virus outbreak itself.”

Oil prices were still plunging at the end of the Asian day, with Brent crude last down 8.29% at $31.26 per barrel, and West Texas Intermediate off 5.35% to $30.12.

In Australia, the S&P/ASX 200 plummeted 9.7% to close at 5,002.00, making for the benchmark’s largest ever daily drop, as the hefty financials subindex slid 11.1%.

Of the country’s major banking plays, Australia and New Zealand Banking Group was down 12.5%, Commonwealth Bank of Australia lost 10.01%, National Australia Bank slid 12.44%, and Westpac Banking Corporation was 11.81% weaker.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 3.56% to end its trading day at 9,476.94, with tourism stocks plunging after the country’s government introduced major restrictions on arrivals into the country.

Tourism Holdings plummeted 31.8% to lead the benchmark index lower, while airport operator AIAL was off 20.9% as it suspended its earnings and capital expenditure guidance for the year.

Air New Zealand was placed in a trading halt, as it announced that it was cutting its international routes by 85% and beginning to identify the first round of redundancies it could make in a bid to save costs.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.2% at AUD 1.6211, and the Kiwi retreating 1.29% to NZD 1.6552.