Saturday, October 23, 2021

Asian stocks fall as Evergrande, inflation worries positive mood

Tokyo: Asian stocks fell on Monday as concerns about China’s asset sector and inflation concerns were offset by US data and positive news on new drugs to fight the coronavirus.

Trading in debt-ridden China Evergrande was suspended after it missed a key interest payment on its offshore debt obligation for the second time last week.

“The biggest problem is not the default by Evergrande, but the environment that has led to its downfall. Authorities are regulating housing loan and lending to property firms. Markets are already looking for the next Evergrande,” said Kazutaka Kubo, senior economist at Okasan Securities.

“There is a growing risk that Evergrande’s crisis will spread to the entire Chinese property sector.”

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent. The index posted its first quarterly decline in six quarters.

Hong Kong led the decline, with the Hang Seng index down 1.9 percent. Japan’s Nikkei fell 1.4 percent to a one-month low of 28,375.

Markets in the Chinese mainland will remain closed until Thursday, while South Korean markets will also remain closed on Monday.

MSCI’s broadest gauge of world shares, the ACWI, slipped 0.1 per cent to 711.92, not far from a three-month low of 705.27 on Friday.

Investor sentiment rose on Friday after Merck & Co. said an experimental oral antiviral treatment that could reduce the chances of dying or being hospitalized for people at risk of contracting severe COVID-19 Is.

A host of US economic data released on Friday showed higher inflation, along with increased consumer spending and accelerating factory activity.

Data published on Friday also showed that euro zone inflation hit a 13-year high last month and is still likely to jump higher.

Investors fear global inflation could last longer than expected, with continued rise in commodity prices and ongoing supply disruptions in many parts of the world, despite Fed Chair Jerome Powell’s insistence that high inflation is fleeting.

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The core US PCE price index, the Federal Reserve’s preferred inflation measure for its flexible 2 percent target, rose 3.6 percent in August from a year ago, its biggest increase in three decades, and matches July’s gains.

Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan, said: “While Powell sticks to his script that inflation will be transitory, he has recently begun to withhold his comments, leading investors to suspect that he too will be able to respond to inflation. worried about.” Stanley Securities.

The rise in inflation is expected to prompt the Federal Reserve to bring forward its timeline for tightening monetary policy, which has boosted US bond yields last week.

But yields have drifted away from last week’s multi-month peak as month-end bond prices rallied.

The 10-year US Treasury yield stood at 1.460 per cent, compared to Tuesday’s three-month high of 1.567 per cent.

Lower US yields also had an impact on the dollar in the money market. The euro fell back to $1.1608 from Thursday’s 14-month low of $1.1563.

The US currency fell to 111.00 yen, down from Thursday’s 1.5-year high of 112.08 yen.

Oil prices remained high, with Brent futures shying away from hitting a three-year high at the end of last month, on hopes that oil-producing countries will raise supplies in a steady manner when they meet on Monday.

Brent futures were trading 0.3 per cent lower at $78.99 per barrel in early trade.

by Hideyuki Sano

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This News Originally From – The Epoch Times

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