trader's opinion

• Fed Outcome Drags...
  Asian | 2012-08-02
• Another Sign that...
  American | 2012-08-02
• ECB’s Potential...
  European | 2012-08-02
• Land Down Under’...
  Asian | 2012-08-01
• Fed Unlikely to...
  American | 2012-08-01
• Euro Zone Worries...
  European | 2012-08-01
• New Zealand Economy...
  Asian | 2012-07-31

Japanese stocks plunged, pushing the Nikkei stock index down 7.3% to notch its biggest loss since the March 2011 earthquake and tsunami, leading to deep declines across the rest of Asia and Europe.

The frenzied selling started after a report early Thursday in Asia trading showed the manufacturing sector contracted in China, a key trade partner for Japan and the rest of Asia, which raised fresh doubts about the strength of the world's second-largest economy. Signs that the Federal Reserve will pull back on its bond-buying program also added to the gloom and led to a selloff in debt, pushing yields sharply higher.

It was a volatile trading day in Asia, with strong gains in Japanese stocks at the start of the day, but they sharply reversed direction following the Chinese manufacturing data, which triggered safe-haven buying of the Japanese currency.

The Nikkei Stock Average lost 1,143.28 points to end the day at 14,483.98. Elsewhere, Hong Kong's Hang Seng Index fell 2.7%, though the Shanghai Composite Index in mainland China fell 0.7%.

The effect of the weak manufacturing data from China was felt in Australia, where the local currency dropped to US$0.9605, a fresh one-year low, from US$0.9665 before the figures were released.

Fed chairman Ben Bernanke told lawmakers the Fed could start reducing its $85 billion-a-month bond-buying program at one of its "next few meetings." That pushed Treasurys down in U.S. trading and spilled over to Japan where the 10-year Japanese government bond earlier climbed to above 1%, its highest level in more than a year. Yields move inversely to bond prices.

In addition, minutes from the U.S. central bank's last policy meeting showed that some officials were prepared to start pulling back the program as early as its June meeting. Although the group as a whole wasn't in complete agreement, the minutes further raised expectations that there could be a change in monetary policy.

The U.S. dollar also gained ground against South Korea's won, and was recently at 1,123.5 won to the dollar. South Korea's Kospi Composite was 0.6% lower.