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Asian markets dive as ECB fans global growth worries

WT24 Desk

HONG KONG – Asian markets tanked and the euro struggled to recover Friday as the European Central Bank’s decision to slash its growth and inflation forecasts added to increasing pessimism about the global outlook, AFP reports.

The announcement — and an extension of stimulus — is the latest warning
of a lean road ahead after China unveiled a target for growth that would be
its slowest in three decades and as the Federal Reserve indicates it will
hold off any fresh rate hikes this year.

It also threw a spanner in the works for investors in the region —particularly Shanghai — who had been chasing a rally fuelled by optimism
that China and the United States will hammer out a deal to end their trade
war.

The ECB said interest rates would be stuck around historic lows until the
year’s end at best, with bank boss Mario Draghi warning the eurozone was
“coming out of, and maybe we still are in a period of continued weakness and pervasive uncertainty”.

Thursday’s news sent the euro into a tailspin to hit a near two-year low
against the dollar, while equity markets across Europe and the US ended in
the red.

Those losses continued in Asia, where Shanghai, which has surged about a
quarter so far this year, shed more than two percent while Hong Kong was off 1.3 percent and Tokyo headed into the break 1.5 percent lower.

Sydney sank 0.8 percent and Singapore 0.5 percent, with Seoul and Taipei
each 0.9 percent off.

Draghi cited “factors… mostly of external source”, including “the threat
of protectionism” and “geopolitical considerations”, and analysts pointed out that the eurozone was in a precarious position.

“With the eurozone likely the next target for (Donald) Trump’s trade-talk
embrace, a slowing economy, a central bank very low on monetary bullets, an inability by members to mount a joint fiscal response and an impending
Brexit… it is no surprise that the euro fell out of bed,” said OANDA senior
market analyst Jeffrey Halley.

The single currency was unable to claw back any of Thursday’s losses
during early Asian business, and the rush to safe investments by traders kept riskier, higher-yielding units beaten down.

Focus is now on the release later Friday of US employment data, which will
provide a fresh snapshot of the world’s biggest economy, though expectations took a hit this week with figures showing moderating private-sector job growth.

– Key figures at 0230 GMT –

Tokyo – Nikkei 225: DOWN 1.5 percent at 21,142.75 (break)

Hong Kong – Hang Seng: DOWN 1.3 percent at 28,412.49

Shanghai – Composite: DOWN 2.2 percent at 3,039.62

Euro/dollar: UP at $1.1192 from $1.1191 at 2140 GMT

Pound/dollar: UP at $1.3089 from $1.3079

Dollar/yen: DOWN at 111.46 yen from 111.63 yen

Oil – West Texas Intermediate: DOWN 32 cents at $56.34 per barrel

Oil – Brent Crude: DOWN 40 cents at $65.90 per barrel

New York – Dow: DOWN 0.8 percent at 25,473.23 (close)

London – FTSE 100: DOWN 0.5 percent at 7,157.55 (close)

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