Stock market rout intensifies amid fears central banks are 'out of ammunition'
Japanese shares have fallen nearly 4% on Wednesday despite a slight recovery in crude oil prices as investors feel central banks are running out of options
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 plunged 4% to a 16-month low with concern about the strength of banks and a stronger yen pulling the market down.
In Australia, banking and mining stocks led the Australian ASX/S&P200 index to its lowest level since 2013. The Chinese markets are closed this week for the lunar new year holidays.
European shares were expected to fall at the opening on Wednesday morning, according to futures trading.
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.”
— Charlie Bilello, CMT (@MktOutperform)February 10, 2016
BREAKING: If the Nikkei continues to fall, Kuroda to borrow Bernanke's helicopter & start dropping Yen from the sky.pic.twitter.com/ZusXIAPArT
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.
There was also concern about the strength of Europe’s banks in particular after the chief executive of Deutsche Bank was forced to reassure staff that the bank was “rock solid”.
“The BOJ has pulled a trigger of competitive monetary easing in the global market,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
“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.
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