Business / Financial Markets

Nikkei sinks more than 6% in Tokyo as global rout over virus continues

AP, Kyodo, AFP-JIJI

Shares in Asia plunged as though in free fall Friday following the worst Wall Street session since 1987, with investors fretting that emergency fiscal and monetary packages to fight the new coronavirus outbreak won’t be enough to stave off a recession.

In Tokyo the benchmark 225-issue Nikkei average ended down 6.08 percent, or 1,128.58 points, at 17,431.05, after nose-diving more than 10 percent in the morning session. The broader Topix fell 4.98 percent, or 66.18 points, to 1,261.70.

Trading was halted temporarily in Bangkok and in Mumbai after the main benchmarks in both markets hit the 10 percent downside limit. After trading resumed, Thailand’s SET 100 was down 8.7 percent and the Sensex in Mumbai had swooned 9.4 percent.

Losses in mainland China, where communities are recovering from the worst of the virus, were less severe, with the Shanghai Composite index down 3 percent. Most other regional markets had lost between 4 percent to 6 percent by midday Friday local time.

“Japanese shares are seen dropping sharply, extending plunges on global bourses,” said Okasan Online Securities chief strategist Yoshihiro Ito in a commentary.

In New York on Thursday, the Dow Jones Industrial Average sank 2,352 points, or 10 percent — its heaviest loss since the Back Monday crash of Oct. 19, 1987, when it dropped nearly 23 percent.

“We’re starting to get a sense of how dire the impact on the economy is going to be. Each day the news doesn’t get better, it gets worse. It’s now hit Main Street to a more significant degree,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

The S&P 500 plummeted 9.5 percent, for a total drop of 26.7 percent from its all-time high set just last month. That puts it way over the 20 percent threshold for a bear market, officially ending Wall Street’s unprecedented bull-market run of nearly 11 years.

The United States has curbed travel from Europe over the spread of the new virus. U.S. President Donald Trump’s comments suggesting delaying the Tokyo Olympics because of the situation were also weighing on the market, analysts said.

“Between the lack of a strong U.S. fiscal response and the latest travel ban for arrivals from Europe to the U.S., global markets appear to have been tipped over into a sell-everything mode,” said Jingyi Pan of IG in a commentary.

Overriding concerns about the actual impact on business and trade is pessimism over how the crisis is being handled, and the “sum of all fears are culminating with the view that policymakers remain well behind the curve,” said Stephen Innes of AxiCorp.

The new virus that causes COVID-19 has infected around 128,000 people worldwide and killed over 4,700. As of Friday, the death toll in China had surpassed 3,100, while Italy has also seen more than 1,000 deaths.

For most people, the virus causes only mild or moderate symptoms, such as a fever and a cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia. The vast majority of people recover from the virus in a matter of weeks.

Given the developments worldwide, finance officials in Japan scrambled Friday to forge steps to sustain financial markets. But they ended up echoing a familiar phrase — continuing to “closely monitor market developments” and “take appropriate measures” to ensure financial stability.

Yoshiki Takeuchi, vice finance minister for international affairs, told reporters that the financial and monetary authorities will be “more vigilant than ever in monitoring market developments,” and would “closely cooperate” with other members of the Group of Seven and the Group of 20.

“If necessary, we will take appropriate measures in accordance with the agreements of the G7 and the G20,” Takeuchi said after a meeting between the Finance Ministry, the Financial Services Agency and the Bank of Japan.

Earlier this month, G7 finance ministers and central bank governors issued a statement after phone talks expressing their commitment to “use all appropriate policy tools” to address the negative impact on the global economy from the coronavirus outbreak, though they did not announce any immediate action.

Finance Minister Taro Aso told a news conference Friday that “uncertainty about the future” was among the reasons for the global market volatility.

“Although stock prices are fluctuating greatly, it doesn’t mean that the financial condition of Japanese companies is getting worse,” Aso said, adding that businesses are likely to regain their footing once the dust begins to settle.

Asked about the possibility of a tax cut to support the economy, Aso said it may not necessarily have the desired effect and that, for now, the government would focus on implementing promised measures including those aimed protecting jobs and providing funding for businesses in need of more working capital.

Coronavirus banner