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Asian markets plunge after Wall Street drops 1000 points

12 February 2018

The dollar edged higher against a basket of major currencies on Friday, thanks to renewed market expectations of higher USA interest rates this year. At midday, the market was on pace for its worst weekly decline since October 2008, at the height of the financial crisis.

Earlier, the Dow Jones Industrial Average fell by more than 1,000 points for the second time this week. The blue chip average suffered its second 1,000-point drop in a week on Thursday. The Standard & Poor's 500 index, the benchmark for many index funds, was on pace to finish its worst week since January 2016.

Although the possibility of higher United Kingdom rates could continue supporting the pound, headwinds around global market volatility and ongoing Brexit uncertainty have the ability to limit upside gains.

All told, the S&P 500 rose 38.55 points, or 1.5 percent, to 2,619.55 Friday.

At 9:32 a.m. ET (1432 GMT), the Dow was up 346.11 points, or 1.45 percent, at 24,206.57. The Nasdaq composite slid 60 points, or 0.9 percent, to 6,716.

Technology companies accounted for most of the broad gains, outweighing losses in energy stocks, which slumped as US crude prices declined.

On bond markets, meanwhile, yields - which rise as the price falls and fall as it rises - have also attracted buyers looking for safety.

Several companies rose sharply Friday after reporting quarterly results and outlooks that beat Wall Street's forecasts. All three had dropped around 2 percent the day before. Chipmaker Nvidia added $6.26, or 2.9 percent, to $223.78.

Expedia slumped after its latest earnings fell short of analysts' expectations.

Corrections of up to 15 percent "are normal", said Oliver.

In a volatile week for global investors, Japan's Nikkei 225 index slid 2.8%, while China's Shanghai Composite slumped by 4.1%.

Paris' CAC 40 finished trading 1.4% down at 5,079.21 points, while the EURO STOXX 50 shed 1.5% at 3,255.99 points.

Chinese markets fell despite unexpected strongly trade data on Thursday. South Korea's Kospi gained 0.5 percent and the Hang Seng of Hong Kong rose 0.4 percent.

A number of trading strategies of late have involved selling the VIX index, sometimes known as Wall Street's fear gauge, which meant that, as volatility increased, traders had to "de-risk" themselves by selling shares.

'No one can say for sure, but things don't look pretty out there given that the sharp falls haven't been bought this time around.

Financial analysts regard corrections as normal events but say the latest unusually abrupt plunge might have been triggered by a combination of events that rattled investors. This fear will also likely encourage investors to reconsider whether to potentially purchase stocks at these lower levels, with it being a possibility that the current selloff might be more than just a short-term correction.

The market, now in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time. Many market watchers have been predicting a pullback, saying stock prices have become too expensive relative to company earnings. "It's taken nine days to go from the January 26 peak to where we are today". Employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1 percent. There was a more muted reaction from investors following the manufacturing and industrial production figures for December, suggesting that investors are not paying as much attention towards the United Kingdom economy when speculating over which way Sterling could possibly go next.

Major economies around the world are growing in tandem for the first time since the Great Recession and corporate profits are on the rise.

At the same time, higher interest rates can make investment alternatives to stocks, such as bonds, more attractive. But stock prices climbed faster than profits in recent years.

When volatility reasserted itself, that was always going to lead to some violent sell-offs, particularly in view of the fact that interest rates have been at close to zero in most advanced economies for the best part of a decade, meaning some investors have been moving in to riskier assets in search of yield.

Rising deficits could drive interest rates higher.

Asian markets plunge after Wall Street drops 1000 points