Asia Stocks Slide as China Data Weighs, Fed Hikes Loom

 

Asian stocks slipped in holiday-affected trade on Monday with shrinking Chinese output, a Wall Street tech rout and imminent Fed rate hikes all weighing on sentiment.

Chinese manufacturing activity dropped last month at its fastest pace since the start of the pandemic as Covid-19 lockdowns in the country’s biggest cities ravage the world’s No-2 economy, stoking fears over global growth.

On the equity markets, Tokyo, Seoul, Mumbai, Manila and Wellington all fell. Sydney also retreated, though Qantas rose more than 2% after announcing it will launch the world’s longest non-stop commercial flight between Sydney and London by the end of 2025.

 

Also on AF: China Covid Crackdown Hits Firms From Tesla to Taco Bell

 

Tokyo stocks ended a difficult trading session lower ahead of three consecutive public holidays, as investors focused on an upcoming US Federal Reserve policy meeting.

The Nikkei 225 index moved between positive and negative territory and closed down 0.11% or 29.37 points at 26,818.53, while the broader Topix index edged down 0.07%, or 1.27 points, to 1,898.35.

The dollar stood at 130.42 yen, off the day’s low of 129.63 yen seen in the morning and 129.86 yen on Friday in New York.

Indian stocks were down too with Mumbai’s signature Nifty 50 index up 0.29%, or 49.85 points, at 17,052.70.

Hong Kong and mainland Chinese markets were closed along with those in Taipei, Singapore, Bangkok and Jakarta.

Paris and Frankfurt sank at the open, though US futures were in positive territory.

 

Fed 50-Point Hike Expected

MSCI’s benchmark for global stocks was down by 0.3% by 0811 GMT as European and Asian shares fell ahead of the Fed’s decision and following Wall Street’s steep losses on Friday.

The pan-European STOXX 600 index fell 1.2%, on course to snap a three-day winning streak.

Investors expect the Fed to raise rates by 50 basis points on Wednesday, although there was uncertainty around how hawkish chair Jerome Powell will sound in comments following the decision.

“A 50bp hike in the fed fund target rate and the announcement of the beginning of quantitative tightening seems to be a done deal,” UniCredit economists led by Tullia Bucco said.

“Still, market participants are uncertain as to whether this big leap forward in the Fed’s policy-tightening process will be accompanied by dovish, neutral or hawkish statements from Powell,” they added in a note.

 

Oil Prices Drop on China Covid Concerns

Around 250 basis points of rate hikes are already priced in by money markets by the end of this year, which UniCredit says reduces the scope for hawkish surprises this week.

On Friday, Wall Street suffered its worst drop since 2020, as Amazon slumped on a gloomy quarterly report, and as the biggest surge in monthly inflation since 2005 spooked investors already worried about rising interest rates.

Oil prices fell as concerns about weak economic growth in Covid hit China lingered, offsetting risks of supply stress from a potential European ban on Russian crude.

The European Union is leaning toward a ban on imports of Russian oil by the end of the year, two EU diplomats said, after talks between the European Commission and EU member states this weekend.

 

Key figures at around 0720 GMT

Tokyo – Nikkei 225 > DOWN 0.1% at 26,818.53 (close)
Hong Kong – Hang Seng Index > Closed for a holiday
Shanghai – Composite > Closed for a holiday
London – FTSE 100 > Closed for a holiday
West Texas Intermediate > DOWN 0.7% at $103.95 per barrel
Brent North Sea crude > DOWN 0.7% at $106.44 per barrel
New York – Dow > DOWN 2.8% at 32,977.21 (Friday close)

 

  • 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.