Asia stocks follow Wall Street tumble on valuation worries

NEW YORK: Asian stocks skidded on Thursday following a sharp Wall Street decline amid deepening concerns about stretched valuations in equities markets, while the dollar and bonds strengthened.

In early Asian trade, Australia's S&P/ASX 200 benchmark lost 1.99per cent, Japan's Nikkei fell 2.28per cent and Hong Kong's Hang Seng index futures lost 0.51per cent. S&P futures pulled back 1per cent.

Adding to the market worries was the outcome of Federal Reserve's policy meeting. While the Fed kept settings unchanged as expected, policymakers flagged a concerning slowdown in the pace of the economic recovery.

On Wall Street, the benchmark S&P 500 index fell nearly 2.57per cent. The Dow Jones Industrial Average fell 2.05per cent and the Nasdaq Composite dropped 2.61per cent.

Boeing Co dragged on the Dow by falling 3.97per cent on a US$6.5 billion charge for its delayed 777X jetliner and crash-plagued 737 MAX.

Michael McCarthy, chief market strategist at CMC Markets in Sydney, said the wider stock selloff was surprising, given strong fourth-quarter results from tech giants.

"A little bit of a sell-the-fact response," McCarthy said, noting stock valuations are at toppy levels. "It might not have everything to do with the Fed."

Noting there was no urgency in dollar or bond-buying, he said: "Maybe what we need is a good old-fashioned panic" to cool valuations.

The S&P and Dow are down 0.14per cent and 0.99per cent, respectively, so far this year.

U.S. Treasury yields remained lower, and the dollar index rose 0.559per cent, with the euro down 0.07per cent to US$1.21.

Upbeat U.S. corporate earnings were not enough to pull the benchmarks higher. Microsoft Corp initially rose but erased most of the gains to end up 0.25per cent.

Facebook shares edged up 0.68per cent while Tesla fell 2.10per cent after the close. Apple shares also dipped in extended trade after its results.

These heavyweights have come back into favor as investors dumped economy-linked banks, energy and small-cap stocks.

On the macro level, the Fed's steady stance shifts the spotlight to how soon and how much fiscal stimulus the U.S. Congress can agree to muster to support the economy.

"The focus is firmly on the fiscal side of the equation now," Rick Rieder, BlackRock's chief investment officer of global fixed income, said in a note.

Stimulus checks and extended unemployment insurance have been important to the U.S. recovery and are "far more targeted and effective in combating a crisis...than 'blunt' monetary policy tools," he added.

Though the U.S. vaccination program may help the economy reopen and rebound more fully later this year, for now Fed officials signaled they see it in a deep hole, with high levels of joblessness, ailing small businesses, and a recent surge in COVID-19 infections.

The pan-European STOXX 600 index lost 1.16per cent and MSCI's gauge of stocks across the globe shed 2.04per cent.

The Japanese yen weakened 0.01per cent versus the greenback at 104.12 per dollar.

(Reporting by Alwyn Scott; Editing by Sam Holmes)