Asia braces for losses after US stocks plunge

SINGAPORE: Traders were set for losses in Asian stocks after a rout in US equities that deepened late in the day amid concerns the trade war is heating up as financial conditions tighten, dampening the outlook for profits. The yen and Treasuries climbed.

Futures indicated Japanese shares will decline more than 3%, with Hong Kong stocks also seen lower. Shares in Australia and New Zealand slid.

The S&P 500 Index fell the most since February and the Nasdaq 100 Index tumbled more than 4% for its worst day in seven years as equity volatility spiked.

Industrial and construction supplies distributor Fastenal Co added to angst that the trade conflict with China is raising materials costs that will crimp profit margins, while French luxury goods maker LVMH confirmed China is enforcing customs rules more strictly.

The dollar fluctuated and 10-year Treasury yields declined to 3.16%.

Just a day before the start of America’s third-quarter earnings season, signs are mounting that companies might not be able to deliver the runaway growth that’s bolstered equities so far in 2018.

Investors have long fretted that the trade war would crimp profits, and now a group of companies is warning that is happening at the same time that rising bond yields make the cost of borrowing higher.

“Earnings are really important because that was part of the concern that sparked the sell-of.

“The concern heading into the third quarter earnings season is about how much trade and tariffs will dent earningsf,” Darrell Cronk, president and chief investment officer at Wells Fargo Investment Institute, told Bloomberg TV in New York.

Meanwhile, President Donald Trump responded to the US stock market sell-off by again criticising the Federal Reserve for raising interest rates, calling it a “mistake.” He said the decline was “a correction that we’ve been waiting for for a long time,” after being briefed on the market turmoil.

Elsewhere, Wall Street’s “fear gauge,” as the Cboe Volatility Index, or VIX, is known, soared the most since February. American crude headed back below US$73 (RM303) a barrel as Hurricane Michael threatened to slash fuel demand across the US Southeast.