Asian markets dive as ECB fans global growth worries

March 09, 2019 | 11:20
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Asian markets tanked and the euro struggled to recover on Friday (Mar 8) as the European Central Bank's decision to slash its growth and inflation forecasts added to increasing pessimism about the global outlook.
asian markets dive as ecb fans global growth worries
The euro is struggling to recover after tanking to a near two-year low against the dollar in response to the ECB's growth forecast cut. (Photo: AFP/Philippe Huguen)

The announcement - and an extension of stimulus - is the latest warning of a lean road ahead after China unveiled a target for growth that would be its slowest in three decades and as the US Federal Reserve indicated it will hold off any fresh rate hikes this year.

It also threw a spanner in the works for investors in the region - particularly Shanghai - who had been chasing a rally fuelled by optimism that China and the United States will hammer out a deal to end their trade war.

Adding to the selling pressure was data showing Chinese exports plunged more than 20 per cent last month, while imports were also sharply down - both missing expectations by some margin.

While the figures were skewed by the Chinese New Year break, they highlight ongoing troubles in the world's number-two economy, which is growing at its slowest pace for three decades.

"All these different variables are beginning to come together to paint a more dismal outlook for global growth," Lindsey Piegza, chief economist at Stifel Nicolaus & Co, told Bloomberg TV.

The ECB said interest rates would be stuck around historic lows until the year's end at best, with bank boss Mario Draghi warning the eurozone was "coming out of, and maybe we still are in a period of continued weakness and pervasive uncertainty".


Thursday's news sent the euro into a tailspin to hit a near two-year low against the dollar, while equity markets across Europe and the US ended in the red.

Those losses continued in Asia, where Shanghai, which has surged about a quarter so far this year, shed 4.4 per cent, while Hong Kong was off 1.9 per cent and Tokyo ended two per cent lower with better-than-thought growth figures unable to help the Nikkei 225.

Sydney and Singapore sank one per cent, with Seoul 1.3 per cent off and Taipei 0.7 per cent down.

In early trade, London, Paris and Frankfurt each fell 0.7 per cent.

Draghi cited "factors ... mostly of external source", including "the threat of protectionism" and "geopolitical considerations", and analysts pointed out that the eurozone was in a precarious position.

"With the eurozone likely the next target for (Donald) Trump's trade-talk embrace, a slowing economy, a central bank very low on monetary bullets, an inability by members to mount a joint fiscal response and an impending Brexit... it is no surprise that the euro fell out of bed," said OANDA senior market analyst Jeffrey Halley.

The single currency was unable to claw back any of Thursday's losses during early Asian business, and the rush to safe investments by traders kept riskier, higher-yielding units beaten down.

Oil prices were down around one per cent as the prospect of a global slowdown weighed on expectations for demand for the black gold.

Focus is now on the release later Friday of US employment data, which will provide a fresh snapshot of the world's biggest economy, though expectations took a hit this week with figures showing moderating private-sector job growth.

- Key figures at 0820 GMT -

Tokyo - Nikkei 225: DOWN 2.0 per cent at 21,025.56 (close)

Hong Kong - Hang Seng: DOWN 1.9 per cent at 28,228.42 (close)

Shanghai - Composite: DOWN 4.4 per cent at 2,969.86 (close)

London - FTSE 100: DOWN 0.7 per cent at 7,108.17

Euro/dollar: UP at US$1.1205 from US$1.1191 at 2140 GMT

Pound/dollar: UP at US$1.3091 from US$1.3079

Dollar/yen: DOWN at ¥111.00 from ¥111.63

Oil - West Texas Intermediate: DOWN 56 cents at US$56.10 per barrel

Oil - Brent Crude: DOWN 73 cents at US$65.57 per barrel

New York - Dow: DOWN 0.8 per cent at 25,473.23 (close)


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