Initial Friday bounce off back of Wall Street gains lost as concerns about wealth manager AMP stoke fears
Australian and Asian share markets continued to be gripped by a volatile mood on Friday as a rally from the previous day’s bloodbath petered out amid concerns over global trade and economic growth.
Trading screens managed to edge into the black in early trade thanks to a bounce on Wall Street overnight, which was helped by bargain-hunting and positive earnings from Microsoft.
But by the afternoon, the sellers had taken control once more. In Sydney the ASX200 gained 16 points before dropping 0.6% by 3.30pm amid more concerns about the wealth manager AMP, which lost 25% of its value on Thursday.
The index eventually closed up slightly by 0.02% but it is still heading towards its worst month since the global financial crisis.
Bell Direct equities analyst Julia Lee said jittery sentiment about US corporate profits has been extended across Asian markets, particularly South Korea, which is a strong export economy.
“Given the type of moves that we’re seeing around the region, we’re just seeing contagion,” she said.
The Aussie dollar, a popular trading proxy for Asia Pacific’s economic fortunes, fell sharply to a 33-month low of US70.29c.
The Nikkei finished down 0.4% in Tokyo and the Hang Seng was off 0.65% in Hong Kong.
In China, the Shanghai Composite was down about 0.6% but, in a further sign that Beijing is concerned about the impact of US tariffs on its exports, the yuan dropped against the greenback to 6.9604 per dollar, its weakest level since January 2017. The yuan last traded at 7.0 during the global financial crisis in 2008.
A depreciating yuan could inflame tensions with the Trump administration, which has threatened to declare China a currency manipulator if it lets the yuan fall to boost its exports.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.04%, erasing tiny gains made in the opening hour and hitting its lowest level since February 2017.
Analysts at Capital Economics sounded a cautious note, suggesting that the bounce on Wall Street on Thursday was only temporary as investor concerns about the economic outlook worsened.
“The first, and most important [worry] is that Fed tightening and fading fiscal stimulus will cause the US economy to take a turn for the worse,” the analysts said in a note to clients. “The second is that China’s economy will continue to struggle.
“As we have been arguing for a while now, these worries are likely to get worse over the next 12 months or so.”
Investors will get a chance to check the US economic pulse later on Friday when the government releases third-quarter GDP data.
In currency markets, the pound barely moved at $1.28 and the euro was at 1.128.
The euro edged lower against the dollar, extending weakness after European Central Bank president Mario Draghi said the bank’s 2.6tn euro ($2.96tn) asset purchase program will end this year and interest rates could rise after next summer, despite fears about the monetary union’s economic and political future. The single currency was 0.03% lower at $1.1371.
The US dollar was off 0.11% against the yen at 112.29 . The dollar index, which tracks the greenback against a basket of six major rivals, was 0.04% lower at 96.636.
Oil prices gave up some ground after earlier rising on signals from Saudi Arabia’s energy minister that there could be a need for intervention to reduce oil stockpiles.
Brent crude fell 0.49% to $76.51 per barrel.