Japanese shares have fallen 2.3% on Wednesday as the Bank of Japan’s recent decision to force interest rates below zero is seen as having little impact ...
Stock markets in Asia Pacific fell heavily on Wednesday with investors fearing that central bankers were “out of ammunition” and unable to intervene to stop a global rout.
As fresh fears about the banking system added to concerns about the wider global economy, the Nikkei average in Japan fell 2.3% to a 16-month low with concern about the strength of banks and a stronger yen pulling the market down....
One analyst said markets could be seeing the start of the “final capitulation” as the attempt by central banks to stimulate growth with cheap money since the global financial crisis in 2008 had run its course.
“The artificial support from central banks is at a crossroads,” said Evan Lucas, of IG in Melbourne. “Central bank intervention will no longer create the holding pattern of the past year; markets now believe banks are out of ammunition.”
He said that the so-called quantitative easing policies pursued by central banks in the US, Japan , Europe and the UK had inflated share prices artificially, especially banking stocks, which were now facing a “global crisis”.
The problems were highlighted by the Japanese market where stocks have fallen to a 15-month low since the Bank of Japan’s announcement last month to force interest rates below zero. ...
The yen touched 15-month highs on Wednesday, making Japanese exports less competitive, and the opposite impact intended by the BoJ’s dramatic move.
“The problems led to weakening fundamentals in the Japanese market. It shows that the Abenomics rally has come to an end,” he said, referring to the prime minister Shinzo Abe’s attempts to lift the economy out of 20 years of stagnation.
In recent days, shares of Bank of America, Citigroup and JPMorgan Chase have hit 52-week lows. Bank of America has lost around 29 percent and Citi around 27 percent, year to date, while JPMorgan is down 13 percent.
Clearly, the decline in bank shares reflects turmoil in the commodities markets, the economic downturn in China and renewed banking troubles in Europe. How much these woes will damage big banks’ balance sheets and income statements remains uncertain.
Investors seem to believe steep loan losses lie ahead. This message comes through loud and clear when you compare some banks’ market capitalizations with their book values, or their net worths. When investors anticipate loan losses, they price bank shares below their corresponding book values...
Investors clearly expect loan losses at these institutions to mount. But they have also been rattled by the possibility that the United States might experience negative interest rates like those found in Japan. Such rates would drive down banks’ profit margins, a reversal from the previously accepted view that banks’ margins would increase this year as the Federal Reserve Board raised rates....
“Nobody believes that the industry has changed,” Mr. Bove said. “Nobody believes that what the government has done has been effective.”
Bank investors have good reason to be doubters. In the years leading to the financial crisis, regulators repeatedly stated that subprime mortgage losses would not be large enough to harm the overall economy. (Remember all the references to the subprime problem being “contained?”) Then, in the aftermath of the mess, investors learned the hard way about losses at these institutions that far exceeded their reserves.
The current psychology “is you can’t believe anything the government says because the government is not prone to telling the truth,” Mr. Bove said. “And you can’t believe anything the banks say because we know they’ve lied to us repeatedly.”
This view represents a “massive failure of government regulation,” Mr. Bove recently told his clients. Investors don’t believe central bankers are effective and they fret that bank balance sheets are “black boxes.”.
A week ago, eight of the major markets we track were not in a bear market. This week, only seven are left. Three of them are within less than one percentage point of qualifying for a bear market. For the moment, the S&P 500 is the cleanest dirty shirt (-11.7%), followed by the Dow (-13.0%), the Korean KOSPI (-15.6%), and the Nasdaq (-17.1%). To find the Nikkei, which a week ago wasn’t even in a bear market, you have to dive much deeper
Vehicles are back on top, helping to lift retail sales to a 0.2 percent gain in January. Excluding vehicles and pulled down by falling gas prices, sales inched only 0.1 percent higher. But retail sales excluding gasoline stations — which is a central reading given the price fall — are up 0.4 percent for a very respectable year-on-year gain of 4.5 percent. The reading excluding both autos and gasoline is also up 0.4 percent in the month for a year-on-year rate of plus 3.8 percent.
US Defense Secretary Ashton Carter said Friday that he was “confident” that both Saudi Arabia and the United Arab Emirates, another Sunni monarchy that has backed the Islamist militias, would send Special Forces units into the country. Meeting with both Saudi and UAE officials on the sidelines of the NATO defense ministers meeting in Brussels, Carter suggested that the Saudi and UAE units would be used to back Syrian Sunni forces in retaking the city of Raqqa from ISIS.
The Syrian government has made it clear that it would view any entry of forces from Saudi Arabia or the other Gulf oil sheikdoms as a hostile invasion