Japan leads declines amid broad slip in Asian stocks
The Nikkei 225 fell 1.11 percent on the day as it closed at 20,166.19, while the Topix index declined by 1.91 percent to finish its trading week at 1,488.19. The benchmark Nikkei 225 dropped more than 2.5 percent in the previous trading session.
Shares of Japanese banks fell on the back of the Bank of Japan’s decision on Thursday to keep interest rate targets unchanged. Mitsubishi UFJ Financial Group shed 2.22 percent while Sumitomo Mitsui Financial Group dropped 2.21 percent. Japanese banks have suffered as a result of the central bank’s loose monetary policy, which has had the side effect of impacting the revenues of the country’s lenders.
Over in South Korea, the Kospi recovered from earlier losses to close slightly higher at 2,061.49 — up 0.07 percent.
In Australia, the ASX 200 lost its earlier gains to close 0.69 percent lower at 5,467.6, with most sectors slipping. Shares of the country’s so-called Big Four banks declined, with Australia and New Zealand Banking Group, Westpac and National Australia Bank all seeing declines of at least 1 percent.
Hong Kong’s Hang Seng index recovered from its earlier losses to trade up by about 0.32 percent, as of its final hour of trade.
On Thursday, the U.S. Justice Department announced charges against two Chinese nationals for being part of a global hacking campaign. The two individuals, Zhu Hua and Zhang Shilong, are charged with conspiring to commit computer intrusions and wire fraud, as well as aggravated identity theft. It was part of campaigns that lasted for years, as they sought to steal from several foreign governments and dozens of companies. The two men remain at large.
Prosecutors also accused the two of operating in conjunction with the Chinese government.
“China will find it difficult to pretend that it is not responsible for this action,” Deputy Attorney General Rod Rosenstein said at a press conference.
“I think it’s important to see these accusations as just the latest, really, in a series of moves by the Trump administration in recent months to frankly, apply more pressure to China across the board,” Michael Fuchs, senior fellow at Center for American Progress, told CNBC’s “Squawk Box” on Friday.
Asia-Pacific Market Indexes Chart
|NIKKEI||Nikkei 225 Index||NIKKEI||20166.19||-226.39||-1.11|
|HSI||Hang Seng Index||HSI||25753.42||129.89||0.51|
|ASX 200||S&P/ASX 200||ASX 200||5467.60||-38.20||-0.69|
|CNBC 100||CNBC 100 ASIA IDX||CNBC 100||7201.90||-42.64||-0.59|
The Cboe Volatility Index — one of the market’s best gauges of marketplace fear — rose above 30.
The Dow and Nasdaq posted their lowest closes since October 2017, while the S&P 500 finished at its lowest level since September 2017.
Stocks fell to the low for the day after U.S. House of Representatives Speaker Paul Ryan announced that President Donald Trump would not sign a temporary government funding resolution. Following the announcement, more political turmoil in the White House ensued when Defense Secretary James Mattis resigned from his post over disagreements with Trump.
The moves Thursday came one day after the Fed decided to hike its benchmark overnight lending rate by one quarter point in the prior session. The Dow fell more than 350 points following the Fed’s decision and pushed the major indexes to new lows for the year.
International benchmark Brent crude futures dropped $2.89, or 5.05 percent, to settle at $54.35 a barrel. U.S. West Texas Intermediate (WTI) crude futures declined by $2.29, or 4.75 percent, to settle at $45.88 a barrel.
Brent hit a session low of $54.28 a barrel, its lowest price since mid-September 2017, while WTI sank to $45.67, its lowest price since late August 2017.
Prices attempted to stage a comeback during the afternoon of Asian trade on Friday, as Brent rose 1.09 percent to $54.94 per barrel and WTI gained 1.09 percent to $46.38 per barrel.
The Japanese yen, widely viewed as a safe-haven currency, traded at 111.30 after touching lows above 112.5 in the previous session.
The moves in the Japanese currency came after the country’s inflation data for the month of November came in below expectations. The core consumer price index (CPI), which discounts the effect of fresh food costs, rose 0.9 percent year-on-year. That was lower than a median market forecast of a 1.0 percent increase, according to Reuters.
The so-called core-core CPI, which discounts the effect of both fresh food and energy costs, gained 0.3 percent on a year-on-year basis. It had risen around 0.4 percent year-on-year in the previous month.
The Australian dollar was at $0.7113 after a turbulent session yesterday which saw it touching highs above $0.714.
— CNBC’s Thomas Franck, Kate Fazzini, Kevin Breuninger and Reuters contributed to this report.
Correction: This story has been updated to correctly reflect the day of trading in Asia.
European close lower amid fragile market mood; Delivery Hero shares jump 10%
European Markets: FTSE, GDAXI, FCHI, IBEX
Europe’s telecoms sector were among those to lead the losses Friday, down more than 0.8 percent. Inmarsat, Telecom Italia and Cellnex Telecom were among the worst performers.
Looking at other individual stocks, Delivery Hero surged to the top of the European benchmark during afternoon deals. It comes after Netherlands-based Takeaway.com announced it would buy the German unit of the world’s biggest online delivery firm for around 930 million euros ($1.07 billion). Shares of Delivery Hero jumped over 10 percent, with Britain’s Just Eat also rising 4 percent on the news.
Meanwhile, Danske Bank shares slipped after the major Danish lender issued a profit warning. The Copenhagen-listed company cut its full-year 2018 net profit outlook by approximately 2 billion Danish crowns ($307 million).
On the data front, morale among Italian business and consumers fell in December. Official data published Friday showed manufacturing confidence dipped to 103.6 in December from a revised 104.3 in November. Meanwhile, business confidence slipped to 99.8 this month, from 101.0 in November. The data signaled escalating gloom in the euro zone’s third-largest economy, prompting Rome’s notoriously fragile lenders to fall into negative territory.
Italy’s Unicredit tumbled to the bottom of the Stoxx 600 shortly after the weaker-than-expected economic data, falling almost 4 percent.
The U.S. central bank raised its benchmark interest rate by a quarter-point on Wednesday, marking the fourth increase this year and the ninth since it began normalizing in December 2015.
The fragile mood in financial markets intensified as President Donald Trump refused to sign legislation to fund the U.S. government on Thursday, raising the risk of a federal shutdown over the weekend.
In Asia, MSCI’s broadest index of Asia-Pacific shares, excluding Japan, slipped 0.5 percent on Friday.
In oil markets, crude futures added to losses in previous session, amid growing energy market worries about oversupply. The value of a price of Brent crude has fallen more than 37 percent since early October.
The international benchmark was trading at around $53.00 Friday afternoon, down around 2.5 percent, while U.S. West Texas Intermediate (WTI) stood at $45.23, more than 1 percent lower.
Dow dives 420 points to end its worst week in 10 years
The Federal Reserve’s rate hike on Wednesday drove the losses this week and fears of an extended government shutdown only added to the pain on Friday.
The Dow Jones Industrial Average fell 400 points in turbulent trading that sent the blue-chip index up as much as 300 points earlier in the day, only to trade in negative territory less than one hour later. The initial tick upward came as Federal Reserve Bank of New York President John Williams said that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows.
But those gains slowly disappeared as investors used that short-term pop as a chance to sell more. The broader S&P 500 fell 2.1 percent on Friday, while the tech-heavy Nasdaq Composite shed more than 3 percent with big losses in technology stocks including Facebook, Amazon and Apple.
Stocks accelerated to their lows after President Donald Trump’s trade adviser, Peter Navarro, told Nikkei that it would be “difficult” for the U.S. and China to arrive at a permanent economic agreement after a 90-day ceasefire in the trade tensions.
Here’s a tally of the carnage:
- The Dow lost 7 percent and nearly 1,600 points on the week. It was its worst percentage drop since October 2008.
- The Nasdaq lost 8.2 percent on the week and is now 22 percent below its record reached in August, a bear market.
- The S&P 500 lost 7 percent for the week and is now down 17.7 percent from its record.
- The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 12 percent each this month.
- Both the Dow and the S&P 500 are now in the red for 2018 by at least 9 percent.
On Thursday, the Dow Jones Industrial Average dropped 464.06 points to close at 22,859.6, bringing its two-day declines — which encompassed the market’s reaction to the Fed’s rate hike — to more than 800 points. The S&P 500 shed 1.58 percent to end Thursday at 2,467.41 while the Nasdaq Composite fell 1.6 percent and closed at 6,528.41. The Cboe Volatility Index — one of Wall Street’s best gauges of marketplace fear — rose above 30 on Thursday, its highest level since February.
“We are listening, there are risks to that outlook that maybe the economy will slow further,” Williams told Steve Liesman on CNBC’s “Squawk on the Street” Friday.
“What we’re going to be doing going into next year is re-assessing our views on the economy, listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and re-evaluate our views, ” he said.
The Fed’s decision to raise the benchmark overnight lending rate by one quarter point on Wednesday triggered a new wave of selling across Wall Street earlier in the week. That move was widely expected by markets but investors appeared to be taken off guard by Fed Chairman Jerome Powell’s comments that the central bank was satisfied with its current path to reduce the balance sheet with no plans to change it.
“This is a real magnificent speech and much different from what most of us are accustomed to,” said Anthony Chan, Chief Economist at J.P. Morgan Chase. “The concern of the market was: what is the Federal Reserve going to do with the fed funds rate in 2019? John Williams told us everything’s on the table, they can adjust that path.”
“Then of course the markets are really worried about that autopilot situation on the balance sheet,” Chan added. “Once again, John Williams said even that is on the table, that if things were to shift, that the Federal Reserve would be flexible on that.”
The Fed currently is allowing $50 billion a month to run off its massive debt balance sheet as its securities mature, tightening financial conditions. The balance sheet is mostly a collection of bonds the central bank purchased to vitalize the economy during and after the financial crisis.
Brendan McDermid | Reuters
“The Democrats, whose votes we need in the Senate, will probably vote against Border Security and the Wall even though they know it is DESPERATELY NEEDED. If the Dems vote no, there will be a shutdown that will last for a very long time. People don’t want Open Borders and Crime!”
Equities fell to their lows of the day in the previous session after U.S. House of Representatives Speaker Paul Ryan announced that President Trump would not sign a temporary government funding resolution without funding for a U.S.-Mexico border wall.
Later on Thursday, the House passed a temporary spending bill with more than $5 billion for Trump’s border wall — an inclusion which will likely impede its ability to clear the Senate. The Senate had unanimously approved a bill Wednesday night to keep the government running through Feb. 8 — without border wall money.
However, Trump later told reporters on Friday that there is a very good chance the House funding bill will not pass in the Senate and that the administration is prepared for a long shutdown.
“Although shutdowns get a lot of media hype, the reality is that stocks tend to take them in stride. In fact, the S&P 500 has gained during each of the five previous shutdowns,” explained LPL Senior Market Strategist Ryan Detrick.
Both House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer have flatly said congressional Democrats will not approve wall money. As Republicans need Democratic votes to pass spending legislation in the Senate, a partial shutdown is all but assured if the GOP insists on funding for the barrier.
Technology and financial stocks were among the biggest losers on Friday.
Facebook lost 6.4 percent, Apple lost 3.6 percent and Amazon lost 5.6 percent. Chipmakers Nvidia and Advanced Micro Devices lost 4.2 percent and 5.7 percent, respectively.
The big banks of Wall Street also sank, with Goldman Sachs falling 4.9 percent, Citigroup down 4.3 percent and Bank of America down 3.1 percent.
Athletic apparel company Nike was one of the few bright spots rallying nearly 7 percent following strong earnings results.
— CNBC’s Sam Meredith, Eustance Huang, Kate Rooney and Jacob Pramuk contributed to this report.