Asia Stocks Slumped Down Says Wall Street

By Faith Magbanua, October 12, 2018 13:10 PM

Stock Market(Pixabay)

Asian stocks have experienced an all-time low earlier this week as uncertainty regarding the ongoing trade war between the US and China and the increasing interest rates from the US. 

Markets in Asia took their signal from US stocks, which suffered their fatal one-day fall in months on Wednesday.

In addition to that, Japan's benchmark Nikkei 225 dropped 3.9% - on course for its biggest daily drop since March.

On the other hand, the Shanghai Composite fell to lowest since 2014. It was 3.9% lower and the Hang Seng dropped 3.8%.

Higher interest rates make borrowing more expensive, slowing economic activity and hurting investor appetite for risk.

A US-led trade war against China has also made investors worried about the outlook for global growth.

Elsewhere in Asia, South Korea's benchmark Kospi index fell 3.4% and Australia's S&P/ASX 200 index fell 2.4%.

Trump's Trade War

US markets have done better than expected this year, coming back after turmoil early in the year to set new records over the summer.

However, the Federal Reserve is raising interest rates, and more is likely to come.

As of last month, the Fed abandoned its description of its policy as "accommodative", reflecting a view that the economy is strong enough not to need the kind of stimulus it received in the aftermath of the financial crisis.

Asia benefited from low interest rates globally post-crisis, as investors sought to put their money in markets offering higher returns.

The prospect of declining US inducement has been compounded by a trade war between the world's two largest economy - which the IMF has warned could harm growth.

Meanwhile, US President Donald Trump has been predominantly critical of the Fed's rate rises, breaking with tradition in the US where presidents are expected to respect central bank independence.

"The Fed is making a mistake," he told reporters on Wednesday. "I think the Fed has gone crazy."

The stock market fall came ahead of America's corporate earnings season, when companies will provide updates to investors about their outlook for the rest of the year.

 

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