Asia extends global stock sell-off after ECB underwhelms

Hong Kong: Asian stocks sank Friday, extending a sell-off in world markets after Europe's central bank unveiled plans to stimulate the continent's ailing economy that fell short of investor expectations.

KEEPING SCORE: Japan's Nikkei 225 dropped 1.9 per cent to 19,556.50 and South Korea's Kospi lost 0.9 per cent to 1,975.27. Hong Kong's Hang Seng shed 1.1 per cent to 22,179.64 and the Shanghai Composite Index in mainland China dropped 0.8 per cent to 3,557.71. Australia's S&P/ASX 200 retreated 1.8 per cent to 5,133.20. Benchmarks in Taiwan and Southeast Asia also lost ground.

ECB EXPECTATIONS: Markets had been anticipating strong action from the European Central Bank in the run-up to its policy announcement Thursday. Expectations were high after ECB chief Mario Draghi signalled the bank would act decisively to keep the 19 countries that use the euro from falling into deflation or an economic contraction. However, the ECB disappointed investors by cutting a key interest rate less than expected and not stepping up monthly bond purchases as expected, in a program known as quantitative easing, or QE.

MARKET INSIGHT: "Mr. Draghi took out his bazooka yesterday and fired it into his own foot," said Michael Every, head of Asia-Pacific financial market research at Rabobank. Following the ECB's decision to hold off raising bond purchases, "the severe market reaction underlines that in the 'new normal', no good deed goes unpunished. By trying to avoid exacerbating currency wars with more QE, the ECB has merely become a victim rather than a victor."

WALL STREET: Major US benchmarks skidded lower after the ECB announcement. The Dow Jones industrial average lost 1.4 per cent to close at 17,477.67 and the Standard & Poor's 500 fell 1.4 per cent to end at 2,049.62. The Nasdaq composite fell 1.7 per cent to 5,037.53.

CURRENCIES: The dollar edged up to 122.58 from 122.53 in the previous day's trading. The euro eased to $1.0921 from $1.0939 after jumping 3 per cent on yesterday's news.

ENERGY: Oil futures rose on the weaker dollar. Benchmark US crude was up 28 cents to $41.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.14, or 2.9 per cent, to close at $41.08 a barrel on Thursday in New York. Brent crude, which is used to set prices for international oils, climbed 25 cents to $44.09 a barrel in London.