Japan leads sell-off, jitters over US economy persist
February 5, 2014, 12:14 am TWN
LONDON--panese shares led another global market sell-off Tuesday as investors fretted over the U.S. economic recovery amid ongoing uncertainties about the outlook for emerging economies.
Diving over 4 percent, the Nikkei 225 stock index ended at a four-month low, sending shivers across Asia. European stock markets are down again but the pace of selling appears to have stabilized somewhat.
The turmoil that has afflicted financial markets over the past few weeks has a number of causes. Some analysts think it's a long-overdue correction in stock values that will eventually bottom out. Many indexes had finished 2013 at record highs.
Others think it's likely to last longer, not least because the U.S. Federal Reserve is reducing its monetary stimulus. The stimulus, in its various guises, has helped shore up markets, particularly in developing countries from Brazil to Turkey to India, since the financial crisis.
In Europe, the FTSE 100 index of leading British shares was down 0.1 percent at 6,459 while Germany's DAX fell 0.7 percent to 9,120. The CAC-40 in France was flat at 4,109.
Wall Street was poised for a modest bounce-back at the open after sliding Monday in the wake of a disappointing manufacturing survey from the Institute for Supply Management — Dow futures were 0.4 percent higher while the broader S&P 500 futures rose 0.5 percent.
The focus of attention will likely remain on the U.S. this week as a run of economic data culminates on Friday with the nonfarm payrolls report for January. The jobs data often set the market tone for a week or two. Investors will be looking to see if the negative winter-related impact that was evident in the ISM survey has translated into job hiring, too.
There's also Thursday's policy meeting of the European Central Bank. Analysts say the bank will be under pressure to ease policy further as inflation remains stubbornly low despite recent signs of life in the eurozone economy.
Given the importance of upcoming events, many analysts think volatility will likely remain a key feature of the week's trading.
In Asia, markets slumped Tuesday — led by a four percent fall in Tokyo — following a huge sell-off on Wall Street as disappointing U.S. manufacturing data compounded already deep fears about emerging markets.
Traders were also spooked by a warning from Treasury Secretary Jacob Lew, who warned that the U.S. borrowing limit will be reached on Friday, renewing fears of a Washington stand-off and possible default.