Post-holiday blues are expected to hit the Singapore stock market when it reopens today after Asian and European bourses slumped sharply yesterday, hit by growing concerns that global central banks' commitment to super-low interest rates and asset purchase programmes may be waning.
Analysts said investors were put off by rising bond yields and talk of a rate hike by the US Federal Reserve as early as next week.
Asian shares suffered their sharpest setback since June while major European stock indexes fell as much as 2.1 per cent. On Wall Street, the Dow Jones Industrial Average opened 0.5 per cent lower.
In Hong Kong, the Hang Seng Index dropped 3.4 per cent, its biggest single-day fall since Feb 11. Chinese stocks in Hong Kong slumped the most in seven months, with the Hang Seng China Enterprises Index tumbling 4 per cent. In Tokyo, the Nikkei 225 shed 1.7 per cent while Sydney's ASX 200 fell 2.2 per cent.
Markets in Singapore, Jakarta, Kuala Lumpur and Manila, which closed for the Hari Raya Haji holiday, are expected to play the sell-off catch-up today.
Global markets have started pricing in a greater chance of a Fed rate hike on Sept 21 on the back of a series of hawkish speeches.
The signals so far are mixed. Atlanta Fed president Dennis Lockhart said current economic conditions called for a "serious discussion" on rates at the Sept 21 meeting. But Minneapolis Fed president Neel Kashkari told CNBC that he saw little urgency to take action, given the state of the economy.
Greater attention would arguably be given to what Fed board member and noted dove Lael Brainard has to say. She was scheduled to speak after press time."Market participants are wondering if maybe she (Ms Brainard) is being wheeled out to give the market one last warning of a rate hike at next week's meeting," said Mr Marshall Gittler, head of research at broker FXPrimus.
"The thinking is that if someone as dovish as she is starts talking like a hawk, people will notice. Her speech will be closely examined."
Some Fed members have been talking up the September meeting as being "live" for a rate hike.
Such risks led Wall Street's fear gauge, the VIX index, to its highest close since late June last Friday.
The selling was also driven by concerns that the European Central Bank and the Bank of Japan (BOJ) may be slowing their monetary policy easing efforts. Reports said that the BOJ is studying options to steepen the Japanese bond yield curve as a means to revive the economy.
Adding to the jittery mood yesterday was news that Democratic candidate Hillary Clinton, 68, fell ill at a Sept 11 memorial ceremony and had been diagnosed with pneumonia.
"It's already priced into the market that Hillary Clinton is going to be president, so right now anything that changes that narrative is going to give the market a pause to consider what that would mean," said Mr Kevin Kelly, chief investment officer at Recon Capital Partners.