By Ese Erheriene
Asian-Pacific stock markets fell Friday, with Japan’s Nikkei hitting a three-month low, pressured by overnight weakness on Wall Street after days of solid gains.
An attack in Barcelona, in which at least 13 people died, as well as political uncertainties in the U.S. and simmering geopolitical tensions had nervous investors shifting their money from global risk assets to safer havens.
“We can now see a reversal in fortunes and sentiment deteriorating,” said Chris Weston, chief market strategist at IG Group. Overnight in the U.S., the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% experienced its biggest decline in three months, while Wall Street’s “fear gauge,” the CBOE Volatility Index /zigman2/quotes/210598281/delayed VIX -1.91% , jumped more than 30%.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.43% dropped 1.2% after falling to its lowest level since May. There was added pressure from the advance of the yen against the dollar—it also gained on the euro and the British pound, hitting multiweek—as that hurts Japanese exporters. The yen /zigman2/quotes/210561418/realtime/sampled JPYUSD +0.0379% was last up 0.1% versus the dollar.
But the Nikkei pared its loss, with analysts saying that strong corporate earnings were providing some support.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.69% fell 1.1%, while Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.68% narrowed its loss to 0.6%. Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +1.33% was off 0.1%. In China, the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP +0.26% ended less than 1 point higher.
Financial shares were among the region’s biggest decliners. In Tokyo, life insurers led the way down: Dai-ichi Life Holdings /zigman2/quotes/208507587/delayed JP:8750 +0.08% fell 2.7% while T&D Holdings /zigman2/quotes/208425761/delayed JP:8795 +0.99% dropped 2.6%. In Australia, three of the country’s four biggest banks — Westpac Banking /zigman2/quotes/203084975/delayed AU:WBC +0.78% , National Australia Bank /zigman2/quotes/210431826/delayed AU:NAB +0.77% and Australia and New Zealand Banking Group /zigman2/quotes/205482049/delayed AU:ANZ +1.03% — each fell at least by 1.2%.
Friday’s declines reflect investors’ increasingly downbeat attitude about stocks, said Soichiro Monji, general manager of economic research at Daiwa SB Investments. More investors fear returns are falling due to slower growth, he said, while risks remain abundant.
“Profit-taking kicks in when stocks make some advance,” Monji said.
Meanwhile, further woes in the Trump administration risk hurting market confidence and business sentiment globally, analysts say. Overnight, U.S. government-bond prices briefly surged on rumors that the director of the U.S. National Economic Council, Gary Cohn, was resigning after President Donald Trump’s remarks on the violence in Charlottesville, Va.
White House aides later told The Wall Street Journal that Cohn hadn’t resigned and didn’t plan to, but the market response showed how closely traders are following events at the White House. Prices for most U.S. government bonds have since declined with yields higher in Asian trade.
Given the run-up in U.S. valuations following the presidential election, “it is better to look for opportunities outside of the U.S., where there is better momentum for growth or reform,” said Paul Flood, a multiasset portfolio manager at Newton Investment Management, which manages 90 billion Australian dollars (US$71 billion) in assets.