Asian Stocks Mixed as Growth, Inflation Fears Loom Large

 

Asia’s major markets endured mixed fortunes on Tuesday with US rate hike and China growth fears still weighing on sentiment, but that represented a step forward after Monday’s stock hammerings.

Japan’s Nikkei index fell for a third day on Tuesday but ended off its lows as bargain hunting emerged and US stock futures pointed to a rebound, while  Shanghai stocks closed at three-month highs on hopes of more policy support after tumbling in morning trade.

The Nikkei closed 1.32% lower at 26,629.86, after earlier sinking as much as 2.19%, the lowest since May 19. The broader Topix slid 1.19% to 1,878.45.

 

Also on AF: Russia Becomes India’s Second Biggest Supplier of Oil

 

Across the East China Sea, Beijing is testing millions to stem the spread from a cluster infection at a 24-hour bar, with China’s vice premier saying Covid prevention and control needs to be strengthened. Shanghai is only just emerging from a crippling two-month-long lockdown.

“The reimposition of restrictions in Beijing, Shanghai and other places is sparking worries of new supply chain disruptions,” said Kazuo Kamitani, a strategist at Nomura Securities.

Tech was among the Nikkei’s worst performing sectors, down 1.95%. Healthcare dropped 2.18%, while real estate slumped the most, down 2.97%.

In China’s markets, the blue-chip CSI300 index rose 0.8% to 4,222.31, while the Shanghai Composite Index gained 1% to 3,288.91 points, after dropping as much as 1.8%.

Financials stocks jumped 2.7%, with banks adding 1.5%, while brokers soared 4.8%, and real estate developers gained 2%. Energy shares rose 2.3% and automobiles finished up 3.3%.

 

Asia Equities Bruised

Hong Kong’s Hang Seng Index was flat, adding just 0.41 points, to finish at 21,067.99.

Indian equities avoided a pummelling, meanwhile, after inflation cooled slightly in May. Prices were still above the central bank’s tolerance band for a fifth straight month, indicating rate hikes would continue.

Mumbai’s signature Nifty 50 index was still down though by 0.27%, or 42.30 points, to close at 15,732.10.

Elsewhere across the region, equities continued to be bruised by the growth concerns that battered US stocks overnight, with benchmark indexes in South Korea, Singapore, and Taiwan shedding more than 1% each.

Australian stocks had a horror day with the ASX 200 down 3.6%, while Singaporean stocks were at their lowest since December, though shares in Malaysia snapped an eight-day losing run.

 

Wall Street Recovery Tipped

Globally, shares inched higher and Wall Street was tipped for a stronger open on Tuesday, as US Treasury yields steadied at multi-year highs following the worst selloff in years.

Monday’s hammering confirmed a so-called bear market for the US S&P 500 equity index, which is down more than 20% from its most recent closing high, on fears central banks may have to up the pace of policy-tightening to curb soaring inflation.

Those expectations took US 10-year borrowing costs, the benchmark interest rate for the global economy, as high as 3.44% on Monday, a 2011 peak.

With the Federal Reserve due to start a two-day meeting later on Tuesday, markets waited to see if it raises rates by 75 bps, instead of the 50 bps originally anticipated.

MSCI’s index of global shares flatlined after Monday’s 3.7% fall, as did a pan-European equity index. But pressure was building again on Wall Street, with S&P 500 and Nasdaq futures up around 1%, ceding some earlier bigger gains.

 

Crypto Descent Continues

There was little let-up for crypto markets, where bitcoin and ether plumbed new 18-month lows, reacting to interest rate expectations and crypto lender Celsius Network’s decision to freeze withdrawals.

The latest selloff on world markets was triggered on Friday by US data showing annual inflation in May shot up by 8.6%.

The ensuing bond selloff lifted two-year US yields more than 50 basis points over two sessions, pushing it above 10-year borrowing costs on Monday in the so-called curve inversion seen as a harbinger of economic recession.

Recession fears failed to dampen oil prices, however. Brent futures rose above $123 a barrel as the tight supply picture highlighted future inflation risks.

 

Key figures

Tokyo – Nikkei 225

Hong Kong – Hang Seng Index – FLAT at 21,067.99 (close)

Shanghai – Composite > UP 1.02% at 3,288.91 (close)

New York – Dow

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O’Meara

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.