Asian Shares Plunge as Central Banks Shock Investors with Emergency Moves
The major Asia Pacific stock indexes finished sharply lower on Monday after aggressive moves by the U.S. Federal Reserve and from other major central banks suggested conditions in the global economy may be worse than previously perceived. Australia led losses with the benchmark S&P/ASX 200 Index plunging close to 10%, its largest every daily drop, according to Reuters.
On Monday, Japan’s Nikkei 225 Index settled at 17002.04, down 429.01 or -2.46%. Hong Kong’s Hang Seng Index closed at 23063.57, down 969.34 or -4.03% and South Korea’s KOSPI Index finished at 1714.86, down 56.58 or -3.19%.
In China, the benchmark Shanghai Index settled at 2789.25, down 98.17 or -3.40% and Australia’s S&P/ASX 200 Index closed at 5002.00, down 537.30 or -9.70%.
Coordinated Monetary Policy Moves by Major Central Banks
Although an emergency move by the U.S. Federal Reserve to shore up the economy is grabbing most of the headlines, other major central banks took similar actions, suggesting there was a coordinated effort to prevent a global recession. Global equity prices plunged across the board as investors read the moves as warnings that conditions are worse than previously expected.
In the U.S., the Federal Reserve slashed its benchmark interest rate to zero and launched a massive quantitative easing program.
The Bank of Japan announced on Monday steps such as the “active” purchase of exchange-traded funds and Japan real estate investment trusts to “contribute to supporting economic and financial activities.”
On Monday, the Reserve Bank of Australia (RBA) made it clear it was ready to spend some big money by buying government bonds and injecting banks with cash.
The Reserve Bank of New Zealand (RBNZ) lowered its benchmark interest rate by 0.75 percent to a record low 0.25 percent.
China Releases Long-Awaited Economic Data
On the economic front, China reported that Industrial Production fell 13.5% in January/February, down from 6.9%, and well-below the -3.0% forecast
China’s Fixed Asset Investment dropped 24.5% from 5.4%. Traders were looking for a 2.0% decline.
China’s Retail Sales declined 20.5%. The markets had priced in a -4.0% loss.
China also said on Monday the national urban survey unemployment rate hit 6.2% in February. That’s the highest on record based on data through Wind Information. The unemployment rate was 5.7% in February for 31 major Chinese cities, the National Bureau of Statistics said Monday.
The drop in China’s industrial output was the sharpest plunge in 30 years in the first two months of the year. Urban investment and retail sales also fell sharply and for the first time on record, reinforcing views that the epidemic may have cut China’s economic growth in half in the first quarter.