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Title : Asian shares tumble after Dow has worst day since 2011
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Asian shares tumble after Dow has worst day since 2011

Asian markets were rattled Tuesday by the miseries on Wall Street, with Japan's Nikkei 225 index briefly dipping more than seven per cent, but investors seemed to be taking the gyrations in stride.

The Tokyo benchmark bounced throughout the day, closing 4.7 per cent lower at 21,610.24.

All regional bourses were battered a day after the Dow Jones industrial average suffered its worst percentage decline since August 2011 and its biggest point drop ever. The Shanghai Composite index fell 3.4 per cent to 3,370.65 and Hong Kong's Hang Seng skidded 4.4 per cent to 30,827.73.

Australia's benchmark S&P ASX 200 slid 3.2 per cent to 5,833.30 and South Korea's Kospi declined 1.5 per cent to 2,453.31.

'Fear rolling over itself'

Two days of steep losses erased the U.S. market's gains from the start of this year, ending a spate of record-setting calm for stocks in a pullback that market pros have been predicting for some time.

Declines of 10 per cent or more are common during bull markets. There hasn't been one in two years, and by many measures stocks have been looking expensive.

Trader Peter Tuchman works on the floor of the New York Stock Exchange on Monday. The Dow Jones industrial average plunged more than 1,100 points as stocks took their worst loss in six-and-a-half years. (Richard Drew/Associated Press)

The same is true of many global markets, where investors have been bracing for a correction while hoping not to see one.

"There would be few places to hide from the risk-off atmosphere that is expected to extend its stay in Asian markets today in a significant manner," Jingyi Pan of IG said in a commentary. "This is fear rolling over itself," she said.

Japan downplays losses

Panic in other markets can send investors racing for the "safe haven" of Japanese yen holdings, she noted. That is painful for Japanese and other regional export manufacturers, whose competitiveness is hurt by stronger currencies that push their prices relatively higher.

Japanese officials sought to downplay the losses.

Market tumble4:19

"The economy has had record high corporate earnings and improving wages and labour conditions. Consumer spending is also recovering and so the Japanese economy is stable," said Toshimitsu Motegi, the economy minister. "As for market movements, I will watch closely for any impact on the economy."

The U.S. dollar was flat at 109.12 yen. The euro rose to $1.2390 from $1.2369.

Inflation concerns

At its lowest ebb during Monday's roller-coaster trading on Wall Street, the Dow was down 1,597 points from Friday's close. That came during a 15-minute stretch where the 30-stock index lost 700 points and then gained them back.

The Dow finished down 4.6 per cent at 24,345.75. The Standard & Poor's 500 index, the benchmark most professional investors and many index funds use, sank 4.1 per cent, to 2,648.94. That was its biggest loss since August 2011, when stocks were reeling as investors fretted over European government debt and the U.S. credit rating was downgraded after the debt-ceiling impasse.

The Nasdaq composite fell 3.8 per cent to 6,967.53, while the Russell 2000 index of smaller-company stocks sank 3.6 per cent to 1,491.09.

Investors have sold shares out of concern that with inflation creeping higher, the Federal Reserve might raise interest rates more quickly, making it more expensive for people and businesses to borrow money and derailing the economic expansion and the prolonged share price rally.

Worse days during 2008 crisis

The S&P 500 has fallen 7.8 per cent since it set its latest record high on Jan. 26.

Monday's drop was bad, but there were worse days during the financial crisis, including a 777-point plunge in the Dow in September 2008 that was equivalent to seven per cent, far bigger than Monday's decline.

Rising bond yields and the prospect of higher interest rates continued to weigh on the benchmark indexes. (The Associated Press)

A 10 per cent drop from a peak is referred to on Wall Street as a "correction." The last such decline came in early 2016, when oil prices were plunging as investors worried that slowing global growth might sharply reduce demand. U.S. crude hit a low of about $26 a barrel in February of that year.

On Tuesday, oil prices were steady. Benchmark U.S. crude fell 56 cents to $63.59 per barrel in electronic trading on the New York Mercantile Exchange. On Monday, it gave up $1.30 to $64.15 per barrel. Brent crude, which is used to price international oils, shed 62 cents to $67.00 per barrel.

The highest bond yields in years are making bonds more appealing to investors compared with stocks. Bond prices jumped after a steep decline on Friday.

On Tuesday, the yield on the 10-year Treasury slipped to 2.73 per cent from 2.84 per cent. Lower interest rates hurt banks because they cannot charge as much money for mortgages and other types of loans.

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