Asian stocks were in retreat on Thursday pushed back by the gloomy global outlook, persistent Covid outbreaks in China and continued tensions between Washington and Beijing.
US stocks ended August with their fourth straight daily decline overnight, cementing their weakest performance for the month in seven years as worries about aggressive interest rate hikes from the Federal Reserve persist.
And those fears sent shivers through Asia with Japan’s Nikkei share average falling to a one-month closing low, dragged down by losses in chip-related stocks after Nvidia tanked overnight over a US order to stop sales of top AI chips to China.
Also on AF: US Orders Nvidia to Stop Sale of Advanced Chips to China
The Nikkei dropped 1.53% to close at 27,661.47, its lowest since August 2. The broader Topix slipped 1.41% to 1,935.49. Chip giants Tokyo Electron and Advantest lost 3.35% and 4%, respectively.
US Federal Reserve Chair Jerome Powell last Friday indicated the central bank will keep raising interest rates to fight inflation, even if that causes pain for households and businesses.
“Unfortunately, investors have turned bearish,” said Takatoshi Itoshima, a strategist at Pictet Asset Management Japan.
China and Hong Kong stocks ended lower, tracking lacklustre performances in other Asian markets, as fresh Covid-19 cases on the mainland worsened an already grim global economic outlook.
China’s blue-chip CSI300 index fell 0.9% to 4,043.74 points, while the Shanghai Composite Index ended 0.5% lower at 3,184.98 points.
In Hong Kong, the Hang Seng index dropped 1.8% to 19,597.31 points.
China Property Crisis Deepens
Although inflation in China is modest and the country’s interest rates keep falling, Covid-19 cases and a deteriorating property crisis threaten a nascent economic recovery.
The southern Chinese tech hub Shenzhen tightened Covid-19 curbs, as cases continued to mount.
“With virus disruptions spreading again, foreign demand cooling, the property sector still in a downward spiral and stimulus failing to gain traction there are few reasons to expect a near-term turnaround,” wrote Julian Evans-Pritchard, senior China economist at Capital Economics.
Elsewhere across Asia, benchmark indexes of export-dependent economies such as South Korea and Taiwan slipped 2.1% and 1.9%, respectively.
Stocks in Seoul hit their lowest levels in more than one month after the country’s export growth slowed in August but imports accelerated widening the trade deficit to a record amount.
Indian stocks suffered too with Mumbai’s signature Nifty 50 index down 1.30%, or 230.30 points, to close at 17,529.00.
Hawkish Fed Expectations
Globally, September got off to a bumpy start as persistent worries about rising global interest rates and recessions hounded stock and bond markets and drove the safe-haven US dollar to a 24-year high against the yen.
And veteran investor Jeremy Grantham warned of an “epic finale” to the stock market “superbubble” inflated by years of cheap money.
“The whole world is now fixated on the growth-reducing implications of inflation, rates, and wartime issues such as the energy squeeze,” Grantham said.
Hawkish Fed expectations saw Treasury yields hit fresh highs. The yield on benchmark two-year notes jumped 6 bps to the highest since late 2007, at 3.51%, while the yield on 10-year bonds rose 6 bps to 3.20%.
Markets are awaiting US non-farm payrolls data on Friday and they may not like a strong number if it supports the basis for a continuation of aggressive rate hikes, which could further boost the US dollar.
Among the main commodities, Brent crude declined 1.6% to $94.09 per barrel. US crude fell to $88.07 a barrel, while European gas prices fell back 4% as markets got used to Russia’s halt in supplies.
Key figures
Tokyo – Nikkei 225 < DOWN 1.53% at 27,661.47 (close)
Hong Kong – Hang Seng Index < DOWN 1.79% at 19,597.31 (close)
Shanghai – Composite < DOWN 0.54% at 3,184.98 (close)
New York – Dow < DOWN 0.88% at 31,510.43 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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