Most Asian stocks shrugged off gains in U.S. futures, extending their tumble to the lowest since 2012 after America’s benchmark index succumbed to a correction. Oil-linked currencies sank further with crude near a six-year low.
Japan’s Topix index lost more than 3 percent for a third day after the hunt for haven investments sent the yen to its strongest level since January. Korean shares fell, while Australia’s gauge fluctuated amid a rebound in futures on the Standard & Poor’s 500 Index. U.S. oil lingered below $39 a barrel, spurring the Malaysian ringgit to extend its 17-year low.
“No one enjoys watching markets implode like this, but there’s not much you can do about it, that’s the problem,” James Lee, managing director and head of securities at First NZ Capital Ltd., said by phone from Auckland. It looks likely “that we carry on the recent trend and if we do, it will be a rough day.”
Markets are battling through their most unsettling period since the global financial crisis, with trillions of dollars wiped off the value of equities and commodities to currencies at multi year lows amid concern China’s slowdown could derail the world economy. The rout gathered momentum on Monday as Chinese stocks plunged, shrugging off government support measures to tumble the most since 2007. Oil is being dogged by concerns over demand.
Early Moves
The MSCI Asia Pacific Index fell 1.3 percent by 9:55 a.m. in Tokyo, set for its lowest close since November 2012. Losses in the Topix put it on track for its worst three-day retreat in more than four years. S&P 500 and Dow Jones Industrial Average futures added at least 1.2 percent with both indexes now in correction territory. U.S. oil traded at $38.38 a barrel after sliding 5.5 percent last session. Norway’s krone dropped a second day.
Elsewhere in foreign exchange markets, trades of the past 24 hours -- when emerging-market and commodity-linked currencies hemorrhaged losses -- were pared, with the yen halting a four-day climb and Australia’s dollar rallying from near its weakest level in six years. The Korean won and Thai baht strengthened at least 0.3 percent as the euro retreated.
“There is no getting away from the fact that this is going to be such a key session,” Chris Weston, chief markets strategist in Melbourne at IG Ltd., said in an e-mail. “It is Asia that is at the epicenter of this concern.”
Futures Rally
U.S. index futures were up across the board, following the steepest two-day selloff in the S&P 500. Nasdaq 100 Index futures gained 1 percent after the underlying measure slid to a 10-month low on Monday.
“They’re up for now, but futures can get swamped by what happens in Asia today,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $22 billion, said by phone. “Only a fool would say that the worst is behind us. People might be thinking this could represent a buying opportunity, but the danger there is trying to catch the falling knife.”
Chinese stock futures foreshadowed more pain for the market seen as the nexus of the current rout. Futures on the FTSE China A50 Index decreased 1.4 percent in recent trading, after the 8.5 percent retreat in the Shanghai Composite Index shook investors. Contracts on the Hang Seng China Enterprises Index, which tracks mainland Chinese stocks in Hong Kong, sank 2.2 percent, while Shanghai Shenzhen CSI 300 Index futures retreated 9.9 percent.
Oil drove the Bloomberg Commodity Index to its lowest level since August 1999 Monday, with West Texas Intermediate crude sliding to a 6 1/2-year low. Brent crude rose 0.4 percent Tuesday, rising to $42.82 a barrel after a 6.1 percent slump.
Copper fell a third day, losing 0.5 percent to $4,928 a metric ton after touching a six-year low last session. Gold for immediate delivery fell a second day, losing 0.2 percent to $1,153.40 an ounce after slipping 0.5 percent Monday.
American Slide
The U.S. experienced a seesaw session Monday, with the S&P 500 erasing more than four-fifths of a 5 percent slide before succumbing to losses again and ending the day down 3.9 percent, its steepest one-day drop in four years. The index is now 11 percent below its May peak.
The Dow Average lost 588 points, or 3.6 percent, Monday in a day of violent swings. The gauge plunged almost 1,100 points in the first five minutes of trading before roaring back to trim its loss to less than 300 points. The Nasdaq 100 Index sank nearly 10 percent at the open, only to close lower by 3.8 percent.
The Chicago Board Options Exchange Volatility Index jumped 45 percent to 40.74, the highest level since October 2011, as about 14 billion shares traded on U.S. exchanges, the most in more than four years and the second-highest value traded ever, according to Credit Suisse Group AG.
Some prominent money managers and forecasts said the selling has gone too far, too fast. Jonathan Golub, chief market strategist at RBC Capital Markets, says the bloodbath in biotechnology and tech stocks is temporary, and investors should buy back the best performers of 2015.
Laszlo Birinyi, the investor whose bullish calls have repeatedly come true since 2009, says that while the selloff lashing global equities is painful, its cause is no mystery -- and that’s a reason for optimism.
“When the issues are on the table, the market will do what it has to to adjust and come out OK on the other end,” Birinyi, the president of Birinyi Associates in Westport, Connecticut, said in an interview on Bloomberg Radio’s “Surveillance” with Michael McKee Monday. “That other end may be a while, and it may not be fun getting there.”