Asian Stocks Extend Global Rout as Draghi Disappoints Investors

Asian stocks joined a global selloff as the scale of further stimulus by the European Central Bank disappointed some investors.

The MSCI Asia Pacific Index dropped 1.1 percent to 132.12 as of 5:16 p.m. in Tokyo, with consumer discretionary and health-care stocks leading losses. U.S. stocks sank the most in two months on Thursday while European equities tumbled after ECB President Mario Draghi announced a deposit-rate cut and bond-buying extension that fell short of what some traders had envisaged. Meanwhile, Federal Reserve Chair Janet Yellen indicated the conditions for higher interest rates in the U.S. have been met, with the focus now shifting to Friday’s jobs report.

The ECB’s additional easing “is about 60 percent of what was hoped for,” Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group Ltd. in Tokyo, said by phone. “The market was hoping for some Draghi magic, but instead we got a Draghi shock.”

The regional benchmark gauge slid 0.8 percent this week for a second weekly drop. It’s down 4.2 percent this year, set for the first back-to-back annual declines in more than a decade, as a slowdown in China accelerates and investors watch moves by central banks from the U.S. to Japan.

Asian stocks this week
Asian stocks this week

The Frankfurt-based ECB will extend quantitative easing by six months until at least March 2017 at the current rate of 60 billion euros ($66 billion) a month, and broaden the assets purchased to include local and regional debt. The Governing Council reduced its deposit rate by 10 basis points to minus 0.3 percent. In the weeks before the meeting, Draghi and his colleagues had communicated growing concern about the low pace of euro-area inflation and the risks to the economic recovery, driving up investor expectations for a larger scale of easing.

Fed chief Yellen delivered a cautiously upbeat outlook for the U.S. economy, signaling she hopes to tighten monetary policy slowly after liftoff. The official U.S. labor report is expected to show employers added 200,000 nonfarm workers in November, reiterating the strength of U.S. employment. Traders are now pricing in a 72 percent chance the Fed will raise interest rates at the December meeting.

Regional Gauges

Japan’s Topix index tumbled 1.8 percent, the most in a month, after the yen gained 0.5 percent against the dollar on Thursday. Shippers led declines after Nomura Holdings Inc. cut its rating on several companies in the industry, sending shares of Mitsui OSK Lines Ltd. 3.7 percent lower.

The Shanghai Composite Index lost 1.7 percent, falling for the first time in five days. The gauge advanced 4.3 percent this week through Thursday as speculation the nation’s central bank will extend monetary easing boosted developers and financial shares. Poly Real Estate Group Co. slid 3.2 percent on Friday, paring its weekly gain to 20 percent.

Hong Kong’s Hang Seng Index dropped 0.8 percent, with China’s state-owned coal companies falling following a 62 percent drop in profits from a year ago. China Coal Energy Co. slid 1.5 percent.

Australia’s S&P/ASX 200 Index slumped 1.5 percent as all ten industry groups dropped, led by telecom and financials. New Zealand’s S&P/NZX 50 Index lost 0.5 percent.

South Korea’s Kospi index fell 1 percent. Samsung Electronics Co. slid 1.6 percent after researcher IDC lowered its global smartphone growth for 2015.

Futures on the Standard & Poor’s 500 Index rose 0.4 percent after the underlying gauge sank 1.4 percent on Thursday, sliding below its average price for the past 200 days for its steepest one-day slump since Sept. 28.

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