Asian stocks were set for a third consecutive week of losses as China’s continuing economic troubles, and the absence of any convincing answers from Beijing, brought the mood down on trading floors.
There are also fears that US interest rates will stay higher for longer than expected after a run of strong data sent long-term Treasury yields surging.
Japan’s Nikkei share average posted its biggest weekly loss in eight months, as it fell for a third session amid lingering concerns about China’s economic outlook and fears for rising yields.
Also on AF: China’s Diving Yuan Could Spark Next Crisis, Hedge Fund Warns
The overnight benchmark 10-year US Treasury yields hit their highest levels since October and 30-year yields hit 12-year highs on concerns that the Federal Reserve will hold interest rates higher.
The Nikkei lost 3.1% for the week, its biggest weekly decline since the week ended December 23. For the day, the index fell 0.55% to close at 31,450.76 in its third straight losing session. The broader Topix lost 0.70% to end at 2,237.29 and fell 2.8% for the week.
China and Hong Kong stocks dropped too, as investor sentiment remained subdued amid a lack of concrete stimulus to boost consumption and support a troubled real estate sector.
Data for July and policy announcements this week have disappointed investors, who were expecting stronger policy measures than just a rate cut.
China Evergrande, which is the world’s most heavily indebted property developer and became the poster child for China’s property crisis, on Thursday filed for protection from creditors in a US bankruptcy court.
Meanwhile, Country Garden’s liquidity crisis has stirred up fears among other developers.
The Shanghai Composite Index dropped 1.00%, or 31.79 points, to 3,131.95, while the Shenzhen Composite Index on China’s second exchange slipped 1.72%, or 34.04 points, to 1,950.26.
The Hang Seng Index was set for its biggest weekly loss in two months as it lost 2.05%, or 375.78 points, to close at 17,950.85.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6% to just a whisker above a nine-month low hit the previous day. That brought the total loss for the week to 3.4% and marked the third straight week of declines for the index.
US Growth Fallout
Europe is likely to open lower as well, with Eurostoxx 50 futures easing 0.3%. S&P 500 futures and Nasdaq futures fell 0.1% and 0.2%, respectively.
After Treasuries were heavily sold off for the past five weeks, longer-dated maturities on Friday found some much needed support as yields near decade highs drew demand.
A strong run of US economic data, including a fall in weekly jobless claims on Thursday, suggested the world’s largest economy is not slowing as desired in the face of high borrowing costs, prompting traders to scale back rate cuts bets next year.
“The market has downsized the extent of future cuts as the economy is just not lying down,” said Padhraic Garvey, regional head of research, Americas, at ING. “Confidence may be down but the US economy continues to spend and make things practically as normal.”
Indeed, the Atlanta Federal Reserve’s GDPNow forecast model suggested the US economy is likely to grow at a 5.8% annualised rate in the third quarter, up from previous forecast of 5%.
In the currency markets, the US dollar recovered from an earlier dip and was standing tall near a two-month top at 103.36 against its major peers. It was up 0.5% on the week.
The Japanese yen regained posture, up 0.3% to 145.40 per dollar, having been hammered this week to a nine-month low of 146.56 per dollar as yield differentials between the US and Japan widened. It, however, still neared levels that sparked an intervention by Japanese authorities late last year.
Elsewhere, oil prices were marginally lower. Brent crude futures dipped 0.2% to $83.94 per barrel and US West Texas Intermediate crude futures was flat at $80.36.
The gold price was 0.1% higher at $1,891.5 per ounce.
Key figures
Tokyo – Nikkei 225 < DOWN 0.55% at 31,450.76 (close)
Hong Kong – Hang Seng Index < DOWN 2.05% at 17,950.85 (close)
Shanghai – Composite < DOWN 1.00% at 3,131.95 (close)
London – FTSE 100 < DOWN 0.82% at 7,250.24 (0933 BST)
New York – Dow < DOWN 0.84% at 34,474.83 (Thursday close)
- Reuters with additional editing by Sean O’Meara
Read more:
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China’s Slow Response to its Economic Woes Puzzling Investors
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Hang Seng Flat, Nikkei Dips on China Woes, US Rate Fears
