HSI Slumps Over Economic Jitters, Tokyo Hammered

Hong Kong stocks tumbled on Monday morning, in line with a sharp sell-off across Asia and tracking a negative lead from Wall Street as investors fret over the outlook for the global economy.

The Hang Seng Index dived 1.8 percent, to 28,595 by the break.

On the mainland, the Shanghai Composite Index fell 1.4 per cent, to 3,061 and the Shenzhen Composite Index dropped 0.9 per cent, to 1,685.

Tokyo was hammered 3.2 percent by the break owing to a surge in the yen, which is considered a safe haven in times of turmoil.

Sydney shed 1.3 percent, Singapore dropped 1.2 percent and Seoul sank 1.7 percent. There was also heavy selling in Wellington, Manila, Taipei and Jakarta.

After a broad-based rally since the start of the year built on hopes for China-US trade talks and a more dovish Federal Reserve, dealers have been spooked by signs of a worldwide slowdown.

"It's pretty clear we've seen a shift in momentum," said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific. "What changed Friday was that there was a strong response to the weakness in growth."

US and European equities went into reverse on Friday as the yield on three-month US Treasury bonds fell below those for 10-year notes – the first time this had happened since before the global financial crisis in 2007.

This so-called inverted yield curve shows investors are more willing to buy long-term debt – usually considered higher risk – as they consider the short-term outlook more risky.

The yield curve is closely watched since it has inverted prior to recessions in recent decades.

The rush to the 10-year US bond market followed weak manufacturing data out of the US, eurozone giant Germany and France.

That came days after the Fed's announcement that it was unlikely to lift interest rates this year owing to unease about the US and global economy.

"Realistically, the European data has generally been poor for most of the year anyway, so this in itself isn't news," said Oanda senior market analyst Jeffrey Halley.

"The US data has been middling, but both confirm what everyone already knew, the global economy is slowing down after a 10-year quantitative-easing-induced bull run," he added, referring to the massive programme of post-crisis stimulus. (AFP)

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