The Asian stock markets fell on Thursday on renewed worries about emerging market economies after the US Federal reserve went ahead with a second $10 billion reduction in its monthly bond purchases. A private sector survey showed China's manufacturing activity contracted for the first time in six months in January, underscoring challenges for China as the economy undergoes a transition towards more sustainable development.
Unfazed by recent selloff in emerging markets, the US central bank announced a second USD10 billion reduction in its monthly bond purchases, to USD65 billion, but reiterated that interest rates will not rise well past the time the employment rate declines below 6.5%. Emerging markets saw their currencies suffer once again in the wake of the Fed decision, making investors more risk-averse.
Japan's Nikkei index closed down 377 points or 2.5% at 15,007 after falling over 3% to hit a 2-1/2-month low of 14,854 earlier the day. The broader Topix index shed 2.6%. Exporters fell broadly as the yen climbed against the dollar amid growing concerns about emerging economies.
On the economic front, overall retail sales in Japan rose 2.6% in December from a year earlier, the Ministry of Economy, Trade and Industry said. That missed forecasts for an increase of 3.9% following the upwardly revised 4.1% gain in the previous month. China's Shanghai Composite index dropped 0.8% to finish at 2,033, dragged down by steel makers and coal miners on growth worries.
An index monitoring manufacturing activity in China reflected contraction in January, the latest PMI from HSBC and Markit Economics revealed, coming in with a seasonally adjusted score of 49.5. That was even worse than the flash estimate that indicated a score of 49.6. The contraction in the sector was the first since July, due primarily to weakness in output and new business.
Hong Kong's Hang Seng index declined half a percent to 22,035. Hong Kong's market will remain closed on Friday and Monday for the Lunar New Year holidays, while Shanghai will be closed until February 7. Australian shares fell notably, tracking weak leads from the US and European markets overnight. The benchmark S&P/ASX 200 index fell 0.8% to 5,188 after gaining a percent the day before.
Among the major banks, ANZ, Commonwealth, Westpac and NAB all ended down about a percent each. Big miner BHP Billiton shed half a percent, while Rio Tinto ended largely unchanged. Fortescue Metals Group declined 1.3% after the iron ore producer warned bad weather during January will reduce its fiscal 2014 shipments.
In economic news, data from Australian Bureau of Statistics showed that Australia's export prices fell 0.5% in the fourth quarter of 2013 compared to the previous three months, while import prices dipped 0.6%, confounding expectations for an increase of 2.0%. New Zealand shares lost ground, joining a global market rout.
The benchmark NZX-50 index dropped 0.7% to finish at 4,850, with tech stocks bearing the brunt of the selling.
Elsewhere, India's Sensex was moving down 1.3%, Indonesia's Jakarta Composite index was down 0.3% and Singapore's Straits Times was losing 0.7%, while Malaysia's KLSE Composite was rising 0.8%.
The markets in South Korea and Taiwan were closed for public holidays. The major US averages fell over a percent each overnight, with the Dow and the S&P 500 falling to their lowest closing levels in over two months, after a slew of big companies such as Yahoo, Boeing and AT&T provided cautious guidance and the Federal Reserve stuck with its plan to trim its monthly bond purchases despite recent turmoil in emerging markets.
