Asia: Markets sink as Fed rate talk brews

[HONG KONG] Asian stocks tumbled on Monday, extending last week's global sell-off as comments from top central bankers rang alarm bells on trading floors that the days of cheap money could be numbered.

Regional investors followed their US and European counterparts in heading for the exit after two Federal Reserve officials on Friday lent their support to a hike in US interest rates as soon as this month.

Boston Fed President Eric Rosengren said higher rates were needed to prevent the economy from overheating, while normally dovish Governor Daniel Tarullo also signalled his openness to a 2016 increase in a television interview.

"There is a consistent undertone building among the Fed Board that delaying rate hikes will hinder rather than assist the economic recovery," Stephen Innes, senior trader at OANDA, said.

Their remarks came a day after the head of the European Central Bank played down the chances of fresh stimulus, while Japanese officials have also refused to give concrete assurances about new measures.

They also came as a surprise to markets after a string of below-par readings on the economy - including service sectors activity and jobs growth - had put off expectations of any tightening to December at the earliest.

Tokyo stocks fell 1.5 per cent by the break, while Hong Kong was off 2.3 per cent and Shanghai shed 1.4 per cent.

Sydney and Wellington each gave up more than two per cent while Seoul was 1.8 per cent off.

"Central banks are reluctant to add additional stimulus and that's causing a lot of concern," Niv Dagan, executive director at Peak Asset Management LLC, told Bloomberg Radio. "We expect additional downside in the near term." With the odds on a US rate hike increasing the dollar rose against the yen, pound and euro Friday but edged back on Monday.

However, it rallied against higher-yielding, riskier currencies. It soared more than one per cent against the South Korean won and 0.8 per cent versus Malaysia's ringgit, while also racking up big gains on the Australian dollar and Indonesian rupiah.

Oil prices tumbled for a second successive day after Friday's sharp losses as relief at news of a huge fall in US inventories was replaced by warnings that it was likely a one-off caused by lower imports.

West Texas Intermediate fell 81 cents to US$45.07, having shed US$1.74 on Friday, while Brent tumbled 72 cents to US$47.29, extending a US$1.98 drop at the end of last week.

In Seoul, market heavyweight Samsung Electronics slumped more than seven percent after US regulators warned people not to use the company's Note 7 because of the risk of its battery exploding. Samsung SDI, which makes the batteries, was six percent down.

The firm last week suspended sales of the new flagship smartphone and announced a recall of 2.5 million units after the faulty batteries caused some handsets to blow up when charging. Several airlines have banned the use of the gadget on their flights owing to fears for the safety of their passengers.

Samsung has lost about a tenth of its market capitalisation in Seoul since the warning.

AFP