Asian markets fell yesterday, tracking the Dow on Wall Street’s first loss in six sessions, with traders disappointed by comments from central banks in Japan and Europe that caused them to roll back their stimulus hopes.
Trading floors worldwide have been humming with excitement for the past few weeks, racking up trillions of dollars in gains, as leaders promised measures to kick start economies in the wake of Britain’s shock EU exit vote.
The upbeat outlook, strong US data and expectations Japan would unveil a huge stimulus — reportedly worth ¥20tn — also sent the yen tumbling against the dollar.
However, the Japanese unit soared on Thursday after the BBC aired a month-old interview with Bank of Japan governor Haruhiko Kuroda in which he said there was “no need and no possibility” for so-called helicopter money to be part of any package.
The strategy of helicopter money sees the bank funnel cash directly into the economy, such as putting cash straight into people’s bank accounts, rather than the more traditional bond-buying method.
The dollar plunged from levels above ¥107 to end on Thursday at ¥105.76. Yesterday it bought ¥105.85.
The “comments will disappoint investors who had been selling the yen in anticipation of the Bank of Japan announcing helicopter money at its meeting next week,” Jasper Lawler, a London-based analyst at CMC Markets, said.
“After the failure of its current... easing programme to boost inflation, helicopter money is one of the few remaining tools in the Bank of Japan’s arsenal.” Later Thursday the European Central Bank held off unveiling any new stimulus, as expected.
But with the shock vote by Britain to leave the European Union expected to hit growth, there was hope boss Mario Draghi would give a strong hint at more relief.
Instead, he only signalled the “readiness, willingness, ability” of policymakers to step in if needed, while praising the resilience of the markets following the Brexit vote.
European markets ended lower, while the Dow, which had seen six straight gains to hit new records, ended slightly lower, with below-par earnings from top firms such as American Express adding to the downside.
The losses were followed in Asia, with Tokyo down 1.1% by the close, while Hong Kong lost 0.2% and Shanghai ended down 0.9%. Sydney eased 0.3%, Singapore was down 0.4% and Seoul was 0.1% lower. There were also losses in Taipei, Manila and Jakarta.
Profit-taking that happened in the US also triggered selling in Asian markets.”
In Tokyo, the Nikkei 225 down 1.1% at 16,627.25 points; Hong Kong — Hang Seng down 0.2% at 21,964.27 points and Shanghai — Composite down 0.9% at 3,012.82 points at the close yesterday.