Asia Stocks Suffer on Fed Hike Signals, Covid in China

Fed minutes released yesterday reveal it’s ready to take an uncompromising approach to soaring prices and inflation causing headaches at home and abroad

 

Asian stocks suffered hefty losses on Thursday after the Fed signalled it was poised to aggressively attack rising inflation and China’s new Covid surge showed no sign of abating. 

China stocks, on the mainland and in Hong Kong, closed down as the country’s worst coronavirus outbreak since the initial wave in 2020 clouded the economic growth outlook, despite pledges by the authorities to roll out more policy support.

Chinese state media quoted the cabinet as saying it would roll out policies to stabilise market expectations in a timely way, without giving details, but that was not enough to lift the mood on trading floors.

 

Also on AF: China Slams AUKUS Hypersonic Missile Pact as Asian NATO

 

“Worries over the downside trend of the economy are the main factor weighing down the market,” Lang Pincheng, general manager of research department at Fortune & Royal Asset, said. “Meanwhile, the resurgence of Covid-19 outbreaks slowed the pace of economic recovery.”

And Nomura analysts warned in a note: “With an increasingly large number of cities under lockdown and amid the downward spiral in the property sector, the impact of incoming monetary easing might be quite limited.”

China’s blue-chip CSI300 index fell 1.3%, to 4,209.10, while the Hang Seng Index lost 1.23%, or 271.54 points, to 21,808.98.

The Shanghai Composite Index fell 1.42%, or 46.73 points, to 3,236.70, while the Shenzhen Composite Index on China’s second exchange sank 1.90%, or 40.42 points, to 2,087.53.

Real estate developers slumped 3.3% as some investors decided to lock in profits after the sector gained a total of 14.5% in the previous four sessions on easing bets.

 

Alibaba, Tencent, Meituan Down

Meanwhile, tech giants listed in Hong Kong lost 2.5%, with Alibaba Group and Tencent Holdings down 2.2% and 1.7% respectively. Food delivery firm Meituan was down 1% after surging as much as 7.2% in early morning trade.

Tokyo stocks closed lower as well after the Federal Reserve’s latest meeting. The benchmark Nikkei 225 index dropped 1.69%, or 461.78 points, to 26,888.57, while the broader Topix index fell 1.56%, or 30.01 points, to 1,892.90.

Indian stocks slumped too with Mumbai’s signature Nifty 50 index down 0.94%, or 168.10 points, to close at 17,639.55.

Sydney, Seoul, Taipei, Singapore, Wellington, Bangkok and Manila joined Mumbai in the red.

 

US Treasury Bond Yields Slide

US Treasury bond yields slipped from multi-year highs on Thursday. Ten-year Treasury yields, the benchmark for global borrowing costs, have risen around 20 basis points this month, adding to a 50 bps surge in March. Shorter-maturity yields, which are more sensitive to interest rate expectations, have jumped even more. 

Those moves, driven by expectations of faster policy tightening by the Federal Reserve and other central banks have weighed on stock markets, pushing MSCI’s global equity index down 7% this year, while the Nasdaq US tech benchmark has lost more than 11%.

Ten-year Treasury yields slipped 4.5 bps to 2.564%, easing from a three-year peak around 2.66% touched on Wednesday. The 2-year note yield fell over 5 bps to 2.43% 

The gap between the two- and 10-year segments was at the widest in a week, reversing the inversion that is seen as a recession signal.

 

Key figures around 0810 GMT

Tokyo – Nikkei 225 > DOWN 1.7% at 26,888.57 (close)

Hong Kong – Hang Seng Index > DOWN 1.2% at 21,808.98 (close)

Shanghai – Composite > DOWN 1.4% at 3,236.70 (close)

London – FTSE 100 > DOWN 0.3% at 7,562.36

Brent North Sea crude > UP 0.4% at $101.44 per barrel

West Texas Intermediate > UP 0.4% at $96.62 per barrel

New York – Dow > DOWN 0.4% at 34,496.51 (Wednesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean OMeara

Sean O’Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.