Asia: Stocks lower after Wall Street has another 'Black Monday', STI down 0.7%

ASIAN stocks are trading lower after Wall Street's record plunge on Monday as policy measures by central banks and governments failed to calm markets fraught with fear by the escalating fallout from Covid-19.

Overnight, the S&P 500 closed 12 per cent lower, effectively erasing its gains from 2019 after the US Federal Reserve made its largest off-cycle emergency rate cut since 2008's Global Financial Crisis. Meanwhile, the Dow Jones Industrial Average shed 12.9 per cent and the Nasdaq Composite Index lost 12.3 per cent. Volatility measures hit all-time highs.

Sentiment was hit further after US President Donald Trump warned that the economic disruption brought about by Covid-19 could extend into August, dashing any remaining hopes of a quick recovery.

"The suggestion itself also points to a recession for the US economy, an idea which many had been contemplating and would suggest a longer period of recovery for the market," IG market strategist Pan Jingyi said.

At Tuesday's open in Asia, most key regional benchmarks had a short-lived spike in the early morning session following US futures' rebound.

"The relative resilience of Asia is entirely down to the bounce in US stock index futures this morning following the gigantic sell off overnight, which follows the typical pattern of market behaviour of the last few months," Oanda Asia-Pacific senior market analyst Jeffrey Halley told The Business Times.

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That said, he pointed out that "investors should be under no illusions that this mornings small rally means the worst is over. It is not."

Singapore's Straits Times Index (STI) dipped 0.4 per cent on Tuesday morning but traded up shortly after as bargain hunters picked up counters at multi-year lows. As at 10.38am however, the STI was trading 16.24 points or 0.7 per cent lower at 2,567.22.

In North Asia, Hong Kong's Hang Seng Index fell 77.58 points or 0.4 per cent to 22,985.99, and mainland China's Shanghai Composite Index lost 38.43 points or 1.4 per cent to 2,750.82.

South Korea's Kospi was down 57.04 points or 3.3 per cent to 1,657.82. Japan's Nikkei 225, which was up in the second hour of trading, eventually pulled back to trade 188.24 points or 1.1 per cent lower at 16,813.80.

In South-east Asia, Indonesia's Jakarta Composite Index shed 151.46 points or 3.2 per cent to 4,539.20, and Malaysia's Kuala Lumpur Composite Index was trading 40.41 points or 3.2 per cent lower at 1,240.22.

Elsewhere in the Asia-Pacific, Australia's commodity-heavy S&P/ASX 200 Index was up 133.50 points or 2.7 per cent to trade at 5,135.50.

In the near term, hopes of a recovery in equities remain bleak.

Oanda's Mr Halley said: "Until we see a shock-and-awe fiscal package from the US - which is not a given at all - that backstops the economy, it is impossible to make a recovery case for equities."

Meanwhile, Stephen Innes, AxiCorp global chief markets strategist, expects safe haven assets like gold to be dragged lower in the near term due to covering margin losses if stocks continue their downtrend.

Over the long haul, however, gold would be supported amid low-interest rates and quantitative easing by central banks, Mr Innes said.