Asian Shares Slip As Fed Chief Warns Of Long Downturn

Asian stocks fell sharply on Thursday after a stark warning from U.S. Federal Reserve Chairman Jerome Powell that the path ahead is both highly uncertain and subject to significant downside risks. Renewed U.S.-China tensions also dented investor sentiment.

Chinese shares fell after a U.S. government retirement fund said it halted plans to invest in Chinese stocks this year amid growing criticism that the move would channel the savings of government workers to companies that are working against the national security goals of the United States.

China’s Shanghai Composite Index ended down 27.71 points, or 1 percent, at 2,870.34, while Hong Kong’s Hang Seng Index tumbled 350.56 points, or 1.5 percent, to 23,829.74.

Japanese stocks extended losses for a third straight session as the yen strengthened and investors cautiously watched the partial lifting of a state of emergency imposed over the coronavirus outbreak for 39 of the country’s 47 prefectures.

The Nikkei 225 Index plunged 352.27 points, or 1.7 percent to close at 19,914.78, while the broader Topix plummeted 28.14 points, or 1.9 percent, to 1,446.55.

Sony slumped 3.9 percent after the company reported a more than 36 percent drop in net profit for the full year through March 2020 and said it anticipates an at least 30 percent decrease in operating profit for the current year to March 2021.

Tech stocks like Advantest and Tokyo Electron lost around 3 percent. Takeda Pharmaceutical surged 4.7 percent after it provided an upbeat earnings outlook for the full year.

Australian markets fell sharply after Powell warned of extended economic weakness and domestic data showed enormous job losses last month as a result of the COVID-19 pandemic and the forced shutdown of many businesses.

The benchmark S&P/ASX 200 Index tumbled 93.20 points, or 1.7 percent, to 5,328.70, while the broader All Ordinaries Index ended down 95.70 points, or 1.7 percent, at 5,418.

The jobless rate in Australia came in at a seasonally adjusted 6.2 percent in April, up from 5.2 percent in March but well beneath expectations for 8.3 percent.

The Australian economy lost 594,300 jobs last month to 12,418,700 – missing forecasts for a decline of 575,000 following the increase of 5,900 jobs in the previous month.

Full-time employment decreased by 220,500 to 8,656,900 people, while part-time employment decreased by 373,800 to 3,761,800 people, official data showed.

The big four banks fell between 2.4 percent and 3.2 percent, while energy stocks such as Woodside Petroleum, Santos, Origin Energy and Oil Search lost around 3 percent.

In the mining space, BHP, Fortescue Metals Group and Rio Tinto ended down between 0.6 percent and 1.3 percent. Gold miners Newcrest Mining soared 3.6 percent and Regis Resources advanced 1.4 percent after gold prices rose overnight.

Graincorp spiked 11.6 percent after the bulk grain handler reported a turnaround to a profit in the first half of the year following the sale of its Australian Bulk Liquid Terminals business and the de-merger of United Malt.

Seoul stocks ended lower, with a grim forecast from the Fed chairman and growing concerns over renewed trade tensions between the United States and China keeping investors nervous.

The Kospi dropped 15.46 points, or 0.8 percent, to 1,924.96. Market bellwether Samsung Electronics declined 1.1 percent and No. 2 chipmaker SK Hynix tumbled 3.6 percent. Top chemical firm LG Chem gave up 2.1 percent and leading steelmaker Posco shed 2.9 percent.

New Zealand shares finished modestly lower as Finance Minister Grant Robertson unveiled an unprecedented NZ$50 billion fund to save jobs and reduce unemployment to pre-coronavirus levels within two years. The benchmark NZX-50 Index fell 42.87 points, or 0.4 percent, to 10,745.16.

Malaysia’s KLSE Composite Index closed nearly unchanged. Malaysia’s GDP grew 0.7 percent on a yearly basis in the first quarter, data from Bank Negara Malaysia showed. That was much slower than the 3.6 percent rise in the fourth quarter of 2019 but confounded expectations for a decline of 1.5 percent.

U.S. stocks hit a three-week low overnight after Fed Chair Jerome Powell warned of a prolonged recession from the viral outbreak and urged Congress and the White House to act further to counter what is likely to be a severe downturn.

Powell also said that negative interest rates are not under consideration, but the Fed will continue to use all tools to their fullest until the crisis has passed and the economic recovery is well under way.

The Dow Jones Industrial Average plunged 2.2 percent, the tech-heavy Nasdaq Composite lost 1.6 percent and the S&P 500 dropped 1.8 percent.

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