Asian investors were in a glum mood on Thursday with worries over China’s faltering economy and the threat of more rate hikes in the US dragging down stock indexes.
Shares across the region sank to nine-month lows, while the dollar was at a two-month peak as traders found it hard to be optimistic.
China mainland indexes made a late recovery as hopes of a reaction from Beijing with some significant stimulus promises, and upbeat tech stocks, lifted prices.
But the deepening property crisis and concerns about potential spillover from payment woes of shadow banking-linked trust products weighed on sentiment.
Also on AF: Struggling Chinese Asset Manager Zhongzhi Looking at Debt Rejig
Zhongrong International Trust, which had sizeable real estate exposure and is a leading trust company controlled by Zhongzhi, has recently missed repayments on some investment products, fuelling contagion fears.
The Shanghai Composite Index rose 0.43%, or 13.61 points, to 3,163.74, while the Shenzhen Composite Index on China’s second exchange was ahead 0.85%, or 16.66 points, to 1,984.30.
Hang Seng Mainland Properties Index was down 1.75% while the main Hang Seng Index lost 0.02%, or 2.67 points, to 18,326.63.
Across the East Chia Sea, Japan’s Nikkei share average ended just above a 30-month low, as concerns over China and another round of rate hikes soured the mood.
The Nikkei fell nearly 1.5% at 31,309.68, its lowest since early June, before paring some of those losses to end the session 0.44% lower at 31,626.00.
The broader Topix similarly fell 0.34% to 2,253.06, having earlier touched a roughly one-month low of 2,227.62.
The benchmark 10-year US Treasury yield hit its highest since October at 4.3120% on Thursday, on the view that rates would remain higher for longer after a recent run of data underscored the US economy’s resilience.
Minutes from the Fed’s July meeting on Wednesday also showed that officials were divided over the need for more rate hikes.
That pushed the yen to a nine-month low of 146.565 per dollar. The dollar/yen pair closely tracks the 10-year U.S. Treasury yield.
Fed Minutes Drag on Wall St
The dour mood in New York and Europe on Wednesday filtered throughout the rest of Asia, where all major markets were deep in the red.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid to 495.03, its lowest since November 29, before clawing back some of its losses to trade 0.49% lower at 500.43. The index down about 8% for August and set for its worst monthly performance since September.
The downbeat atmosphere is set to continue in Europe later in the day with Eurostoxx 50 futures down 0.51%, German DAX futures down 0.55% and FTSE futures 0.35% lower.
The pan-European STOXX 600 hit a fresh one-month low on Thursday, weighed down by luxury companies that are exposed to Chinese consumer demand.
Overnight, Wall Street ended lower after minutes from the Fed’s July meeting showed officials were divided over the need for more interest rate hikes.
“Some participants” cited the risks to the economy of pushing rates too far even as “most” policymakers continued to prioritise the battle against inflation, the minutes showed.
US Homebuilding Surge
The US central bank hiked rates by 25 basis points at the July meeting after standing pat in June.
Markets are pricing in an 86% chance of the Fed standing pat next month, the CME FedWatch tool showed, with a 36% chance of it hiking in its November meeting.
Data showed US single-family homebuilding surged in July and permits for future construction rose amid a shortage of previously owned houses in another sign of a resilient economy that has led economists to temper forecasts of a recession.
Fed staff, who present their own independently developed views of the economy to policymakers, dropped their projection for a recession later this year.
In commodities, oil prices dropped for the fourth straight session. US crude fell 0.21% to $79.21 per barrel and Brent was at $83.37, down 0.1% on the day.
The spike in rates has weighed on non-yielding gold, which touched a five-month low on Thursday. The metal was last $1,892.30 an ounce, having dropped to its weakest level since March 15 at $1,888.30.
Key figures
Tokyo – Nikkei 225 < DOWN 0.44% at 31,626.00 (close)
Hong Kong – Hang Seng Index < DOWN 0.02% at 18,326.63 (close)
Shanghai – Composite > UP 0.43% at 3,163.74 (close)
London – FTSE 100 < DOWN 0.32% at 7,333.21 (0933 BST)
New York – Dow < DOWN 0.52% at 34,765.74 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
Read more:
Hedge Funds Dump China Stocks Over Property, US Tech War Worry
Evergrande Delays Creditors Meeting Amid New Restructure Plan
China Woes Weigh on Hang Seng, Nikkei Drops on Banking Fears
