Hong Kong benchmark heads for correction as China shares tumble

Hong Kong benchmark heads for correction as China shares tumble

The market, now in its second-longest bull run of all time, had not seen a correction for two years, an unusually long time. Benchmarks in Australia, South Korea and Southeast Asia also retreated.

USA equity markets pointed to a possible halt to the massive selling that has engulfed the markets this week. Britain's FTSE 100 fell 0.4 percent Friday to 7,141 points, while Germany's DAX was flat at 12,262 and France's CAC 40 declined 0.3 percent to 5,136.

Markets across Asia have fallen, following a 1,000 point loss for the Dow on Thursday.

The market's turmoil began last Friday and has continued this week as investors anxious about early signs of inflation.

On Wall Street, many companies that rose the most over the previous year have borne the brunt of the selling. Boeing, Goldman Sachs and Home Depot took some of the worst losses.

Pressure on USA stocks again came from the Treasury market, where another weak auction put gave bond bears ammunition, sending the 10-year yield as high as 2.88 per cent. Equity investors took the signal to mean interest rates will push higher, denting earnings and consumer-spending power.

Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market's relentless march higher over the past year. The Nasdaq composite fell 274.82 points, or 3.9 per cent, to 6,777.16. "However, our view remains that it's just another correction", said Shane Oliver of AMP Capital in a report.

The price-to-earnings ratio of the Shanghai index was 15.27 as of the last full trading day while the dividend yield was 1.9 percent.

A number of other institutional investors have also recently made changes to their positions in the stock. Employers are hiring at a healthy pace, with unemployment at a 17-year low of 4.1 percent. Manufacturing is rebounding. Households and businesses are spending freely. And major economies around the world are growing in tandem for the first time since the Great Recession.

The sharp plunge followed another ugly performance from United States stocks which fell heavily into the close, mirroring the price action seen on Monday. The fund's "portfolio is better protected from market declines now", he said. If rates rise quickly, that argument becomes much less persuasive.

In currency markets, the dollar edged up to 108.84 yen from Thursday's 108.73 yen. The euro slipped to $1.2263 from $1.2276.

Crude oil futures fell sharply Wednesday, extending a recent slump after data showed USA oil inventories dropped for a second week in a row. It retreated $70 cents on Thursday to $68.81. Brent crude, the worldwide standard for oil prices, dropped 15 cents to $65.36 per barrel in London.

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