Expectations that the U.S. Federal Reserve will start to phase out its monetary stimulus dragged down Asian stock markets on Friday.
A fall in weekly U.S. jobless claims to a near six-year low on Thursday reinforced views that the economy is strong enough to withstand having less extraordinary support from the Fed. The Labour Department reported that weekly claims slid 15,000 last week to 320,000, the lowest level since October 2007.
Analysts said the sharp fall makes it more likely that the Fed will scale bank its $85 billion-a-month purchases of government bonds in September. The purchases have helped to lower interest rates to spur borrowing and economic growth after the global financial crisis of 2008 sparked a recession.
The stimulus program has been a boon to stocks, in to which investors ploughed money in search of investment returns that outpace bonds. Traders have come to view a withdrawal of the Fed program as a negative for stocks even in the face of evidence that the U.S. economy is improving.
Japan’s Nikkei 225 index fell 1.4 per cent to 13,557.42. Hong Kong’s Hang Seng dropped 0.9 per cent to 22,343.73. South Korea’s Kospi shed 0.5 per cent to 1,914.02. Australia’s S&P/ASX 200 lost 0.8 per cent to 5,110.50.
South Korean companies that operated various projects in North Korea gained ground Friday after the two Koreas agreed to work toward reopening a jointly run factory park in the North. Hyundai Merchant Marine Co., the largest shareholder in Hyundai Asan Corp., the developer of the Kaesong industrial complex in North Korea, jumped 9.3 per cent.
Negative corporate news out of the U.S. also led to frayed nerves. Wal-Mart, the world’s largest retailer, cut its profit and revenue forecasts for 2013. It also reported second-quarter results that missed Wall Street’s estimates.
Cisco Systems announced plans to cut 5 per cent of its workforce, roughly 4,000 employees, as sales slow. Cisco’s announcement led to selling in other technology stocks because the company is regarded as a bellwether for the industry.
The Dow Jones industrial average fell 225 points, or 1.5 per cent, to 15,112.19 its worst day in nearly two months. The Standard & Poor’s 500 index dropped 1.4 per cent, to 1,661.32. The Nasdaq composite fell 1.7 per cent, to 3,606.12.
Benchmark oil for September delivery was down 8 cents to $107.25 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 48 cents to $107.33 late Thursday in New York.
In currencies, the euro rose slightly to $1.3350 from $1.3349 late Thursday. The dollar rose to 97.34 yen from 97.07 yen.