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Asian Market Bleed as Australia shed 2%

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Asian and Pacific Rim markets were broadly lower Wednesday as the Australian benchmark, the ASX 200 led the way as it shed over two percent.

Asian traders are spooked over recent coronavirus headlines which saw the United States issuing a warning of a domestic outbreak. This sent Wall Street lower as traders flew into safe haven asset classes.

In Japan, the Nikkei 225 was down over one percent by lunchtime. The Nikkei shed over three percent on Tuesday. The Topix index, in Tokyo, was down over one percent.

In South Korea, the Kospi composite index lost just over one percent, as well.

The Hang Seng index in Hong Kong was down just about half a percent and the mainland markets in China were mixed. The Shanghai recovered early losses to gain 0.3 percent. The Shenzhen composite fell 0.78 percent.

Elsewhere in the Asian region, the Australian S&P ASX 200 was down 2.5 percent as all of the sub-sectors were in the red. The heavily weighted financial sub-index shed over two percent on the day.

Asian Traders Monitor U.S. Headlines over the Coronavirus

Overnight the United States warned their citizens to prepare for the possibility of a pandemic. It is not a matter of if the coronavirus will hit the U.S. but when.

This sent Wall Street lower alongside Treasury yields. Traders flew into safety. The ten year Treasury yield is now at a record low.

The U.S. is preparing as the coronavirus has spread into European Union member nations, Italy, Germany and Spain. There are more cases being reported in South Korea and Italy. Also Iran is reporting an uptick in new cases.

Financial Traders now worry about the Economic Impact of a Pandemic

Traders are starting to grow more and more concerned as the outbreak spreads beyond China. Most of the Asian economies are now expected to slow, halt or even contract in the first quarter of 2020.

This is prompting index futures swaps, with global central banks, to price in further monetary easing to insulate against economic damage. U.S. money market futures are now fully pricing in a 25 basis point rate cut from the Federal Reserve by their June policy meeting.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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