Asia’s major stock indexes took a battering on Thursday as worries over the deteriorating situation in the Middle East and fading hopes of lower interest rates any time soon dominated the mood.
The bond sell-off intensified, taking Treasury yields to fresh 16-year highs ahead of a keenly awaited speech from Fed Chair Jerome Powell, as investors sought safer assets, shunning equities and keeping gold prices near two-month peaks and the dollar firm.
Japan’s Nikkei share average closed nearly 2% lower, tracking a sell-off on Wall Street after robust US economic data fuelled bets for a hawkish Federal Reserve, while mounting tensions in and around Gaza also heightened risk aversion.
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Chip-related shares were notable under-performers after traders took cues from US peers as the spike in long-term Treasury yields weighed on the so-called growth stocks.
The Nikkei finished the day 1.91% lower at 31,430.62, close to the session low of 31,399.17, a level last seen on October 10. Of its 225 components, 179 fell versus 44 gainers. The broader Topix lost 1.36%.
Heavyweight chip-making equipment maker Tokyo Electron dropped 4.7% to be the biggest drag on the Nikkei. Chip-testing equipment maker Advantest slumped 3.4%.
Chinese stocks hit a new low for the year, dragged by consumer-related shares as investor confidence remained depressed despite signs that parts of the economy are stabilising. Hong Kong shares also fell.
Data on Wednesday suggested the economy is stabilising, but analysts and investors are still concerned if the economy has truly bottomed out, with the property sector mired in a deep contraction.
China’s biggest private property developer Country Garden was due to pay a coupon payment on a bond on Wednesday, but bondholders were reportedly yet to receive it. Non-payment would put the developer at risk of default.
China’s blue-chip CSI 300 Index dropped 2.13%, while the Shanghai Composite Index lost 1.74%, or 53.32 points, to 3,005.39, with both touching their lowest levels this year.
The Shenzhen Composite Index on China’s second exchange lost 1.51%, or 28.03 points, to 1,828.09.
Xpeng, Nio Stocks Dive
In Hong Kong, electric vehicle makers Xpeng and Nio slumped more than 8%, following their American Depositary Receipts (ADRs) in New York. Tech giants trading in the territory were also down 1.9% and the Hang Seng Index retreated 2.46%, or 436.63 points, to 17,295.89.
Elsewhere across the region, in earlier trade, Sydney, Seoul and Singapore were down. There were also losses in Mumbai, Manila, Jakarta and Wellington. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.42%.
The gloomy mood was likely to continue in Europe. Futures indicated stock markets in the region were set for a lower open, with the Eurostoxx 50 futures down 0.61%, German DAX futures down 0.59% and FTSE futures 0.35% lower.
US President Joe Biden pledged to help Israel and the Palestinians during a lightning visit on Wednesday.
The region remained volatile in the aftermath of an explosion at Gaza’s Al-Ahli al-Arabi hospital late on Tuesday, which Palestinian officials said killed 471 people and blamed on what they said was an Israeli air strike.
Israel and the US said the cause was a failed rocket launch by Islamist militants in Gaza who denied responsibility.
Gold Prices Strengthen
Oil prices eased on Thursday after OPEC showed no signs of supporting Iran’s call for an oil embargo on Israel and as the United States plans to ease Venezuela sanctions to allow more oil to flow globally.
Oil prices had skipped 2% higher in the previous session on worries over disruptions to global supplies.
The spotlight will now be on Fed Chair Jerome Powell, who will take the podium in New York on Thursday with his colleagues at the US central bank in apparent agreement to hold interest rates unchanged at their next meeting in two weeks.
The yield on 10-year Treasury notes was up 6.4 basis points to 4.966%, touching highest since mid-2007.
The dollar index, which measures US currency against six rivals, rose 0.056%. The Japanese yen was at 149.80 per dollar.
US crude eased 0.16% to $88.18 per barrel and Brent was at $91.11, down 0.43% on the day.
Spot gold was at $1,948.42 per ounce, just shy of $1,962.39, its highest since August 1. Gold prices are up 6% in the past two weeks.
Key figures
Tokyo – Nikkei 225 < DOWN 1.91% at 31,430.62 (close)
Hong Kong – Hang Seng Index < DOWN 2.46% at 17,295.89 (close)
Shanghai – Composite < DOWN 1.74% at 3,005.39 (close)
London – FTSE 100 < DOWN 1.10% at 7,504.82 (0934 BST)
New York – Dow < DOWN 0.98% at 33,665.08 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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