Asia: Markets dive as ECB fans global growth worries

[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.

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 per cent while Hong Kong was off 1.3 per cent and Tokyo headed into the break 1.5 per cent lower.

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

Mr 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 2.30am GMT

Tokyo - Nikkei 225: DOWN 1.5 per cent at 21,142.75 (break)

Hong Kong - Hang Seng: DOWN 1.3 per cent at 28,412.49

Shanghai - Composite: DOWN 2.2 per cent at 3,039.62

Euro/dollar: UP at US$1.1192 from US$1.1191 at 9.40pm GMT

Pound/dollar: UP at US$1.3089 from US$1.3079

Dollar/yen: DOWN at 111.46 yen from 111.63 yen

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

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

New York - Dow: DOWN 0.8 per cent at 25,473.23 (close)

London - FTSE 100: DOWN 0.5 per cent at 7,157.55 (close)

AFP