* Nikkei cleaves through major chart support, much of Asia
in the red
* European share markets seen down 0.8 to 1.1 pct
* Nasdaq suffers biggest one-day fall since 2011
* Funds rotate out of US momentum stocks to bonds, emerging
By Wayne Cole
SYDNEY, April 11 Japanese shares staggered to
six-month lows on Friday as an escalating selloff on Wall Street
spread to Asia and slugged markets that had been fairly
resilient up to now.
European bourses were destined to share the pain with the
DAX predicted to open down as much as 1.1 percent and
the FTSE 0.8 percent, according to spread betters.
The S&P 500 E-Mini contract was holding steady, at
least for now.
What was increasingly looking like a major portfolio shift
from momentum plays in U.S. technology and biotechnology stocks
was having a knock-on effect across all regions and sectors,
pressuring even defensive shares.
Momentum investing involves buying stocks that are already
trending higher, often taking their price/earnings ratios into
the stratosphere. When the momentum turns it can do so viciously
as investors rush to the exits at the same time.
Japan, in particular, was vulnerable both to the dive in
tech stocks and to the strength of the yen, which crimps exports
and corporate profits. The Nikkei gapped lower right from
the off to reach a trough of 13,885.
Dealers suspected the authorities were working behind the
scenes to get public pension funds to buy and stop the rot, but
with only limited success.
The index ended 2.4 percent lower at 13,960, with the breach
of chart support at 14,200 and the close under 14,000 both body
blows from a technical perspective.
Tech bellwether Softbank felt the heat with a drop
of 3.8 percent to its lowest in over two months. Clothing giant
Fast Retailing shed almost 8 percent after it cut its
profit forecast when investors were already nervous about the
impact of this month's sales tax hike.
Markets across Asia were spooked by the scale of the losses,
with Korea down 0.6 percent and Australia 0.9
percent. MSCI's broadest index of Asia-Pacific shares outside
Japan lost 0.8 percent.
Even the MSCI emerging markets index eased back a
little, a day after reaching its highest for the year so far.
The emerging sector has been on a tear in the last couple of
weeks as funds cut back exposure to developed markets.
The retreat followed a brutal day on Wall Street, where the
Nasdaq suffered its worst single-day drop since late 2011. The
tech-heavy index sank 3.1 percent, while the Nasdaq
biotechnology index plunged 5.6 percent.
The selling rippled through the broader market pulling the
Dow down 1.62 percent and the S&P 500 2 percent.
Investors were in part taking profits as the U.S. corporate
reporting season started amid expectations that results would
not be stellar enough to support the high valuations of some
stocks. JPMorgan and Wells Fargo both report
With stocks out of favour, government bonds were set to
benefit and yields on the benchmark 10-year U.S. Treasury note
fell to their lowest since Feb. 27 at 2.62 percent.
They were last at 2.656 percent in Asia.
Even Greece managed a triumphant return to the bond market
just two years after its default placed it at the centre of the
euro zone debt crisis.
The afterglow from the Greek deal combined with the latest
drop in U.S. yields helped the euro higher on the dollar. On
Friday, the single currency was up at $1.3892 having
rallied two full cents over the past four sessions.
The dollar recouped a little lost ground on the yen to
101.77, though that was still off a high of 102.14 on
Thursday. So far, speculative sellers have shied away from major
chart support around 101.20 which has held for much of the past
Against a basket of currencies, the dollar was a fraction
firmer at 79.412, after hitting a three-week low of 79.330 on
The fall in the dollar helped gold edge up to $1,320.32 an
ounce, and further away from the month's trough at
Oil prices remained soft in the wake of disappointing trade
data from China out on Thursday and the prospect of increased
supply. Brent crude eased 23 cents to $107.23 a barrel,
while U.S. crude was quoted down 32 cents at $103.08.
(Editing by Eric Meijer & Shri Navaratnam)