On a Wednesday in early September 2020, Asian markets woke to the consequences of a sharp retreat on Wall Street, where the giants of technology, having carried much of the year's optimism, suddenly lost their footing. The fall spread across the region as crude and bond yields softened too, a reminder that markets rise on stories about the future and fall when those stories are questioned. Behind the numbers lay a familiar human tension: a pandemic-battered world hoping for a swift recovery, a rivalry between the two largest economies, and a crowd of traders whose bets had grown heavier than t
Asian Markets Slide as Tech Selloff Spreads Across the Globe
The optimism balloon floated by vaccine hopes has sprung a sizable leak.
Mark
Start with the basics. Why did Asian markets fall on Wednesday?
Mimi
Because Wall Street fell first. Big tech stocks sold off in New York, the Nasdaq dropped 4.1%, and Asia followed, with Australia down 2.3% and Tokyo down 1.5%.
Mark
Was this about the economy getting worse?
Mimi
Not directly. Tech had soared this year, up nearly 23% in the S&P 500, and analysts point to heavy options trading that pushed prices even higher before it unwound.
Luke
Careful, though. That options explanation is the analysts' reading. The report doesn't quantify how much of the drop it accounts for.
Mark
And the China-U.S. tensions and the vaccine news?
Mimi
They added to the nerves. Trump's talk of decoupling and AstraZeneca's trial troubles both rattled investors.
Luke
Rattled is the report's word, and no figure ties either one to a specific move. Those are contributing factors, not measured causes.
Mark
So is this a panic?
Mimi
ING's Robert Carnell says no. He calls it orderly, with buyers still stepping in.
Luke
That's one economist's view. Innes of AxiCorp describes a leak in the optimism, so the interpretations differ. Whether this is a pause or a turn isn't known yet.
Mark
What's the clearest sign of broader worry?
Mimi
Oil fell, with U.S. crude at $36.48, and Treasury yields eased to 0.67%. Both fit with expectations of slower growth.
The Pulse
- Big tech stocks plunged more than 4% in a single session, dragging the Nasdaq down 4.1% and the Dow down 2.2%.
- Asian exchanges followed Wall Street lower, with Australia's ASX 200 tumbling 2.3% and Tokyo's Nikkei losing 1.5%.
- Options-fueled buying that had pushed tech prices higher was unwinding fast, turning gains into sudden pressure.
- Investors weighed US-China decoupling rhetoric, stalled American aid talks, and AstraZeneca vaccine trouble against fragile recovery hopes.
- Analysts call the slide an orderly technical correction with buyers still present, not a panicked flight to safety, though oil and yields kept sliding.
On a Wednesday in early September 2020, Asian markets woke to the consequences of a sharp retreat on Wall Street, where the giants of technology, having carried much of the year's optimism, suddenly lost their footing. The fall spread across the region as crude and bond yields softened too, a reminder that markets rise on stories about the future and fall when those stories are questioned. Behind the numbers lay a familiar human tension: a pandemic-battered world hoping for a swift recovery, a rivalry between the two largest economies, and a crowd of traders whose bets had grown heavier than the underlying ground could easily bear. Whether this is a passing correction or the first crack in a longer rally remained, at that moment, an open question.
Asian markets opened Wednesday still reeling from the night before in New York. A heavy selloff in the largest American technology companies had pulled Wall Street's main indexes down, and the damage rolled across the region, joined by weaker crude prices and lower Treasury yields. In Tokyo the Nikkei lost 1.5%, Hong Kong's Hang Seng slipped 1%, and Australia's ASX 200 took the hardest hit at 2.3%. Technology names felt it sharply too, with SoftBank down 5% and Alibaba and SMIC also lower.
The night before, the S&P 500 had fallen 2.8%, its first three-day losing streak in nearly three months, and the Nasdaq dropped 4.1%, now 10% below its record from early September. Apple, Microsoft and Amazon each fell more than 4%. Tech had run far ahead of the rest of the economy this year, and much of that climb was fed by a flurry of options trading. Such bets can amplify a rally until they unwind all at once, which is what began last week.
Other anxieties compounded the mood: a setback in AstraZeneca's vaccine trial, sharpening China-U.S. tensions, and President Trump's talk of decoupling the American economy from China as the campaign heats up. The strained relationship between the world's two largest economies weighs on a global recovery already battered by the pandemic. Even so, some analysts saw an unwinding of overheated positions rather than a retreat to safety, with buyers still stepping in as prices fell.
Elsewhere, the 10-year Treasury yield eased to 0.67%, and oil slid as slower growth raised fears of oversupply, with U.S. crude near $36.48 a barrel. Stalled talks in Washington over more aid for unemployed workers offered little comfort. What comes next depends on whether the rhetoric hardens, whether aid talks collapse, and whether the vaccine setback deepens.
Asian markets opened Wednesday under the weight of what had happened in New York the night before. A selloff in the biggest U.S. technology companies had dragged Wall Street's main indexes down, and the damage carried across the region, along with weaker crude oil prices and lower Treasury yields.
In Tokyo, the Nikkei 225 lost 1.5%, and Hong Kong's Hang Seng dropped 1%. Australia's S&P/ASX 200 fell the hardest, tumbling 2.3%. The Shanghai Composite shed 1%, and South Korea's Kospi slipped 0.8%. Shares also fell in Taiwan and across most of Southeast Asia. Among the technology names, SoftBank Group lost 5%, Alibaba fell 2.5% in Hong Kong, and chip maker SMIC gave up 2.7%.
The night before, the S&P 500 had fallen 2.8% to 3,331.84, its first three-day losing streak in nearly three months, with almost 90% of its shares lower. The Dow Jones Industrial Average lost 2.2% to 27,500.89. The Nasdaq composite, heavy with tech stocks, took the worst of it, dropping 4.1% to 10,847.69. That leaves it down 10% from its record high on Sept. 2. Apple, Microsoft and Amazon each sank more than 4%, and their weight pulled the broad indexes down with them.
The tech sector had run far ahead of the rest of the economy this year. Tech shares in the S&P 500 are still up nearly 23% for 2020, and Amazon has climbed 70.5%, despite the pandemic's toll. Analysts say a recent flurry of trading in stock options on the Big Tech companies pushed prices higher still. Certain options let investors profit handsomely from a rising stock without paying its full price, and if enough are sold, the resulting buying can feed on itself. That activity can unwind quickly, which is what began last week. Critics had long argued the stocks had climbed too high even after accounting for their strong profit growth.
Other worries added to the pressure. Trouble with AstraZeneca's coronavirus vaccine trial and simmering China-U.S. tensions rattled investors. President Donald Trump's talk of "decoupling" the U.S. economy from China, as the presidential campaign heats up, raised uncertainty while Washington works to limit Chinese companies' use of U.S. technology on national security grounds. The strained relationship between the two largest economies threatens global growth at a time when the pandemic has pushed many countries into recession. Stephen Innes of AxiCorp said that, at a minimum, the optimism built on vaccine hopes had developed a sizable leak.
Still, some analysts read the move as a correction rather than a retreat to safety. Robert Carnell of ING Economics said it felt more like an unwinding of overbought positions than a generalized flight to safety, calling the decline orderly if substantial, with buyers still present on the way down.
Elsewhere, the 10-year Treasury yield fell to 0.67% from 0.72% late Friday, though it remains well above the 0.53% on offer at the end of July. The growing likelihood that Democrats and Republicans will fail to agree on more aid for unemployed workers also dimmed hopes of extra help for the U.S. economy.
Oil slid on expectations that slower growth would leave supply outrunning demand. Benchmark U.S. crude lost 28 cents to $36.48 a barrel in electronic trading, after falling $3.01 to $36.76 on Tuesday. Brent crude shed 25 cents to $39.53, following a $2.23 drop overnight to $39.78. Hayaki Narita of Mizuho Bank pointed to the re-emergence of US-China risks as casting serious doubt on assumptions of a fairly steady demand recovery.
What to watch next: whether the decoupling rhetoric sharpens, whether aid talks in Washington collapse, and whether the vaccine trial setback deepens.
Notable Quotes
This is an orderly if substantial decline. There are still clearly buyers on the way down.— Robert Carnell, ING Economics
The optimism balloon floated by vaccine hopes has sprung a sizable leak.— Stephen Innes, AxiCorp
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