Asian shares were on the slide again on Thursday with political uncertainty in the US, inflation worries and a cryptocurrency crisis all contributing to a pessimistic outlook.
With no final results available from the US mid-term elections, investors turned their focus to upcoming inflation data later in the day, while Binance, the world’s biggest crypto exchange, decided not to acquire smaller rival FTX, which is grappling with a severe liquidity crunch sending shivers through the crypto world.
Control of both houses of Congress remains up for grabs following yesterday’s elections, although Republicans are projected to earn a narrow majority in the House.
Also on AF: China Copper Firms Call For More Mining to Boost Supply
A divided government is often seen as positive for US stock markets, as gridlock between Congress and the White House reduces the likelihood of passing disruptive new regulations or tax increases.
Japanese shares, though, fell back tracking an overnight decline on Wall Street following those inconclusive US election results.
The decline was led by oil, coal, iron and steel firms and at the at the closing bell, the benchmark Nikkei index was down 270.33 points, or 0.98%, at 27,446.10.
The broader Topix index on the Tokyo Stock Exchange was down 12.83 points, or 0.66%, to 1,936.66.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%, dragged lower by a 1.0% drop in China’s bluechips and a retreat in Hong Kong’s Hang Seng index.
China is again grappling with a Covid surge, with the southern metropolis of Guangzhou reporting thousands of cases.
Apple Inc supplier Foxconn plans to update its fourth-quarter outlook on Thursday, after strict Covid curbs remained in place at its major plant in China despite the lifting of a lockdown.
The Shanghai Composite Index dipped 0.39%, or 12.04 points, to 3,036.13, while the Shenzhen Composite Index on China’s second exchange dropped 0.98%, or 19.69 points, to 1,991.82.
The Hang Seng Index dropped 1.70%, or 277.48 points, to 16,081.04.
FTX Collapse Spooks Markets
Elsewhere across the region, Indian stocks fell too with Mumbai’s signature Nifty 50 index down 0.71%, or 128.80 points, to close at 18,028.20.
Globally, market sentiment took a dive as the likely collapse of crypto exchange FTX spooked investors.
European markets were set to extend the cautious mood, with the pan-region Euro Stoxx 50 futures down 0.7%. However, US S&P 500 futures edged up 0.2% while the Nasdaq futures rose 0.3%.
Elsewhere, the focus remained squarely on that US inflation number due out later on Thursday.
“The high probability is we see a number that is fairly in line with expectations – that is obviously harder to call, and we may need to wait for the guidance from Fed speakers in the session ahead to see how they interpret it,” said Chris Weston, head of research at brokerage Pepperstone.
The futures market currently showed investors believe the Fed could step down to a 50 basis point hike next month, while the target US federal funds rate could peak around 5.1% by next June.
US Dollar Holds Onto Gains
In the crypto world, bitcoin rose 3.6% to $16,443, after tumbling for two straight sessions to its lowest level since late 2020.
Binance, the world’s biggest crypto exchange, said late on Wednesday that it had decided not to acquire smaller rival FTX, which faces bankruptcy without more capital.
“You can’t deny the growing correlation between bitcoin and risk assets. The FTX news is having an outsized effect on asset prices,” said Stephen Innes, managing partner at SPI Asset Management.
“Bitcoin spillovers are not negligible, and given how widely crypto coins are held, it could mean more forced liquidation of other assets to cover margin calls as long position investors were massively wrong-footed.”
The US dollar on Thursday held onto most of its overnight gains against a basket of currencies.
US Treasury yields were lower on Thursday. The yield on benchmark 10-year notes eased 8 basis points to 4.0751% while the yield on two-year notes edged 3 basis points lower to 4.5963%.
In commodities, oil prices trimmed earlier losses after tumbling around 3% in the previous session on fears of demand from China and rising US crude stocks.
US crude oil futures was flat at 0.3% to $85.83 per barrel, while Brent crude futures stabilised at $92.71.
Key figures
Tokyo – Nikkei 225 < DOWN 0.98% at 27,446.10 (close)
Hong Kong – Hang Seng Index < DOWN 1.70% at 16,081.04 (close)
Shanghai – Composite < DOWN 0.39% at 3,036.13 (close)
London – FTSE 100 < DOWN 0.14% at 7,285.91 (0940 GMT)
New York – Dow < DOWN 1.95% at 32,513.94 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
Read more:
Crypto Markets Shaken After Binance Abandons FTX Bailout
China, Russia Are Trouble-Spots Likely to Spur Defaults – JPM
