Global stock drop deepens in Asia on worries over economic growth, STI down 1.1%

An investor drinks tea in front of a screen showing stock market movements at a securities firm in Fuyang, China.
An investor drinks tea in front of a screen showing stock market movements at a securities firm in Fuyang, China. PHOTO: AFP

WELLINGTON (BLOOMBERG) - Asian stocks fell a sixth day on Wednesday (May 4), on track for their longest drop since February, with anxiety over the global economy unnerving investors.

A retreat in industrial metals drove Australia's benchmark down the most in a month, with Japanese markets closed until Friday for holidays. US crude traded at US$43.80 a barrel following a 5 per cent selloff the past two days. The US dollar soared versus Malaysia's ringgit, with Federal Reserve Bank of Atlanta chief Dennis Lockhart bringing the prospect of a June rate hike back into play.

The MSCI Asia Pacific excluding Japan Index dropped 0.5 per cent as of 10 am Tokyo time, set for its lowest close since April 11. The S&P/ASX 200 Index sank 1.2 per cent in Sydney while the Kospi index in Seoul slipped 0.6 per cent.

Singapore's Straits Times Index was down 1.12 per cent at 2,779.70 as of 10:03 am.

Futures on the S&P 500 Index were little changed early Wednesday after the US benchmark dropped 0.9 per cent to wipe out Monday's advance.

Evidence of economic weakness from the US to China and the UK has provided a speed bump for global risk markets, which had been recovering from the early 2016 selloff amid monetary easing and a rebound in oil prices.

Citigroup's Economic Surprise Index for the US, which measures the strength of data relative to forecasts, has fallen to its lowest level since February and analysts are predicting an 8 per cent decline in company earnings.

"In a now familiar theme, traders are becoming concerned about the possibility that the next volatile market swing, in this case downward, may not be too far away," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail to clients. "Both US stock market valuations and commodity prices have risen to levels that could be difficult to sustain against the ongoing reality of sluggish global demand growth."

The ringgit sank 1.1 per cent to 3.9742 per US dollar, touching its weakest level since March 29 as oil held below US$44 a barrel. Malaysia is Asia's only major net oil exporter. The Korean won dropped 1 per cent, while the Thai baht slipped 0.4 per cent.

"The market is grasping the view that the dollar probably fell a little too much, and a rebound could be ahead, and this seems to have deteriorated sentiment towards emerging-market assets including the won," said Jeon Seung Ji, a currency analyst in Seoul at Samsung Futures Inc.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after snapping a three-day drop last session to gain 0.7 per cent.