On Wednesday, Asian stocks experienced a decline as apprehensions about sluggish growth in China and Europe intensified concerns about global economic momentum. Simultaneously, the U.S. dollar strengthened as investors carefully evaluated the Federal Reserve’s stance on interest rates.
At 05:20 GMT, FTSE futures and E-mini futures for the S&P 500 index were both down 0.42% and 0.13%, respectively, signaling an impending lower opening for London and U.S. markets.
MSCI’s gauge of Asia Pacific stocks, excluding Japan, dipped 0.45% during the session.
The Hang Seng Index incurred a loss of 0.56%, and China’s benchmark CSI300 Index witnessed a decline of 0.59%. This decline occurred just ahead of China’s anticipated release of August trade data on Thursday, with analysts projecting a continuation of the downward trend in exports and imports, albeit at a slower pace.
Investor sentiment was adversely affected by a private-sector survey released on Tuesday, revealing that China’s services sector expanded at its slowest pace in eight months in August, underscoring weakened demand.
Redmond Wong, the Greater China market strategist at Saxo Markets, remarked, “The China decline was bigger than expected.” He further added, “The Chinese government has become more active and is relaxing more regulation, but whether it is good enough remains to be seen.”
China is also poised to release data on lending and inflation in the coming days.
Simultaneously, manufacturing data from Germany, Britain, and the euro zone also portrayed declines, while their service sectors entered a state of contraction.
Wong stated, “The European data were rather weak. We think there is still a high chance of a mild recession in the U.S. and Europe toward the end of the year or the beginning of next year.”
In Australia, the S&P/ASX 200 extended its losses to 0.76%, despite second-quarter gross domestic product beating forecasts with a 0.4% rise.
Japan’s Nikkei 225 share average, on the other hand, outperformed, gaining 0.52%. This was attributed to the weakest yen rate observed since November, which boosted exporters such as automakers. Additionally, energy shares performed well, propelled by a surge in crude oil prices.
The yield on the benchmark U.S. 10-year Treasury note escalated by 9 basis points to reach 4.26%. It even reached 4.268%, marking its highest level since August 25. Concurrently, the U.S. dollar surged to nearly a six-month high against a basket of currencies.
Investors are presently digesting recent signals concerning potential U.S. interest rate hikes. Fed Governor Christopher Waller conveyed on Tuesday that the latest round of economic data provides the U.S. central bank with the room to assess whether it needs to raise rates once more.
John Milroy, an investment adviser at Ord Minnett, remarked, “(The) Fed is a focus for us; we think they have more work to do with the potential for U.S. rates to continue heading higher.”
In a note released on Wednesday, the BlackRock (NYSE: BLK) Investment Institute stated, “We see central banks being forced to keep policy tight to lean against inflationary pressures.”
The Institute for Supply Management (ISM) is slated to release U.S. services PMI on Wednesday.
U.S. crude inched up by 0.06% to $86.74 a barrel, while Brent gained 0.07%, trading at $90.10 a barrel. Oil prices had surged more than 1% in the previous session due to concerns about a supply shortage following Saudi Arabia and Russia’s extension of their voluntary supply cuts through the end of the year.
Spot gold saw a slight rebound, up 0.09% at $1,927.79 per ounce by 05:34 GMT, after posting its most significant one-day loss since August 1 on Tuesday.
