Asian shares on edge as United States futures slip

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Japan's Nikkei 225 Stock Average plunged by more than 7 percent in early trading on Tuesday, suffering its biggest one-day points drop since 1990.

At its lowest ebb during Monday's roller-coaster trading on Wall Street, the Dow was down 1,597 points from Friday's close.

The big question is whether the stock market drop, which saw the main USA stock indexes on Monday post their biggest percentage falls in six and a half years, represents the start of a more protracted decline.

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

The losses followed a massive US sell-off on Monday, which saw the Dow Jones industrial average break below the 25,000 level and erase gains made by the index this year. After its 1,175-point nosedive Monday, the Dow Jones industrial average lost 567 points right after trading began but eventually gained 567 points, adding 2.3 percent to 24,912.77.

"If we look at some of the drivers of the recent volatility - the natural correction and the bond sell-off - we don't foresee any of these factors contributing to a lengthy period of extreme volatility", said Tom Kenny, senior economist at ANZ.


"This increased volatility had been one that the market was anticipating at the start of the year, but certainly took its time to arrive and may retain a spot in the market after this week's tumultuous turn".

The question for investors is whether the turbulence is a sign that the long bull market is over. Gainers included technology companies, retailers like Amazon and Home Depot, and industrial companies and banks.

The highest bond yields in years are making bonds more appealing to investors compared with stocks. The yield on the 10-year Treasury note rose to 2.74 percent from 2.71 percent. Futures on Australia's S&P/ASX 200 Index rose 1.7 per cent. Futures on Hong Kong's Hang Seng Index advanced 0.5 percent. It ended the day 2.6% - or 193 points - down at 7141.

With the pivotal gauge of S&P 500 volatility, the VIX, opening at a relatively elevated 31 percent, equity markets are not out of the woods, especially in the United States, market watchers say.

Britain's FTSE 100 was down 0.8 percent to 7,222 points and France's CAC 40 dropped 0.7 percent to 5,218.

After Tuesday's rebound the S&P 500 is still down 6.2 percent from the record high it set on January 26.


The fall of the Wall Street coincided with the inauguration of Jerome Powell, the new president of the Federal Reserve Authority. Under normal circumstances, that backdrop would see interest rates rise quickly, but in many parts of the world they are still at levels not uncommon to a recession or even a depression. The last market correction ended nearly two years ago.

But with the Federal Reserve seen likely to raise short term interest rates again three or four times in 2018, bond yields have been rising, and last Friday's healthy USA labor market report sparked fears of rising inflation, leading to Monday's sharp bout of profit taking.

Also Wednesday, U.S. crude oil added 29 cents to $63.68 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the benchmark for global oil prices, rose 25 cents to $67.11 a barrel in London.

On currency markets the yen, considered a go-to unit in times of turmoil and uncertainty, climbed against the dollar.

The turnover on the third trading day of the week came to 4,526.0 billion yen (41.41 billion USA dollars).


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