Asian stocks slumped on Monday as investors braced themselves for even more rate hikes in the wake of surprise US jobs figures and the ever deepening global economic picture.
Shares slipped across the region after a drop in US unemployment on Friday quashed any thought of a pivot on policy tightening – and that’s ahead of a reading on inflation this week which is expected to see core prices move higher again.
Geopolitical tensions added to the uncertainty as markets waited to see how the Kremlin might respond to the bomb blast that hit Russia’s only bridge to Crimea.
However, holidays in Japan and South Korea made for thin trading, while the Treasury market was also shut on Monday.
Also on AF: China Golden Week Revenues Slump as Covid Rises: Nomura
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.4% with China stocks hardest hit, after the US moved to blacklist more of its tech firms and bring in more curbs on US tech exports to China.
China’s semiconductor index fell more than 5% after Washington published a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment.
The Shanghai Composite Index dipped 1.66%, or 50.24 points, to 2,974.15, while the Shenzhen Composite Index on China’s second exchange dropped 2.2%, or 41.49 points, to 1,870.50.
The Hang Seng Index dropped 2.95%, or 523.39 points, to 17,216.66.
Elsewhere across the region, most markets were in retreat. Indian stocks slipped with Mumbai’s signature Nifty 50 index down 0.6%, or 105.65 points, at 17,209.00.
Wall Street sank on Friday after an upbeat payrolls report seemed to seal the deal on another outsized rate hike from the Federal Reserve.
“We are in the midst of the largest and most synchronised tightening of global monetary policy in more than three decades,” said Bruce Kasman, head of economic research at JPMorgan, who expects hikes of 75 basis points from the US Federal Reserve, the European Central Bank and the Bank of England.
Dollar Index Firm
Headline consumer price inflation is seen slowing a touch to an annual 8.1%, but the core measure is forecast to accelerate to 6.5% from 6.3%. The US Consumer Price Index data will be released on Thursday.
“The September CPI report should show a moderation in goods prices that is a likely harbinger of a broader slowing in core inflation,” added Kasman. “But the Fed will not be responsive to a whisper of inflation moderation as long as labour markets shout tightness.”
Minutes of the Fed’s last policy meeting are also out this week and are likely to sound hawkish given how many policy-makers lifted their dot plot forecasts for rates.
Wall Street also faces a testing time on corporate earnings with the major banks kicking off the season on Friday, including JPMorgan, Citi, Wells Fargo and Morgan Stanley.
One likely bone of contention will be the strength of the dollar, which will pressure offshore earnings.
The dollar index was firm at 112.760 having risen for the past three sessions. It stood at 145.34 yen but had so far shied away from the recent 24-year top of 145.90 for fear of Japanese intervention.
Yields on 10-year bonds are still up at 4.237% and a long way from the 3.31% level held before the British mini-budget sent the market into a tailspin.
Oil prices ran into profit-taking after Brent climbed 11% last week in the wake of a deal on supply reductions by OPEC+. Brent crude eased 91 cents to $97.01 a barrel, while US crude fell 84 cents to $91.80 per barrel.
Key figures
Tokyo – Nikkei 225 <> CLOSED
Hong Kong – Hang Seng Index < DOWN 2.95% at 17,216.66 (close)
Shanghai – Composite < DOWN 1.66% at 2,974.15 (close)
London – FTSE 100 < DOWN 0.89% at 6,928.68 (0935 BST)
New York – Dow < DOWN 2.11% at 29,296.79 (Friday close)
- Reuters with additional editing by Sean O’Meara
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