Asian shares witnessed a downturn on Tuesday due to mounting concerns over the Chinese property sector, impacting markets spanning from Hong Kong to Australia. Simultaneously, Japanese investors, returning from a holiday-extended weekend, offloaded chip stocks.
U.S. Treasury yields remained close to 16-year highs, and the dollar held firm at six-month peaks in anticipation of a forthcoming Federal Reserve rate decision set for Wednesday. This week also features policy decisions from the Bank of Japan and the Bank of England, among others.
Crude oil prices continued their ascent, fueled by tightening supply, intensifying concerns of stagflation.
MSCI’s broadest index of Asia-Pacific shares saw a dip of 0.3%. Japan’s Nikkei, burdened by significant losses in chip-related stocks like Tokyo Electron and Advantest, plummeted by 1.1%.
Japanese markets were closed on Monday, a day when Asian tech stocks faced declines following a Reuters report revealing that TSMC had requested its major vendors to delay deliveries. On Tuesday, TSMC’s stock slipped by 0.4%, reversing an earlier gain of up to 0.6%. The previous day, it had plunged by 3.2%.
John Pearce, CIO at Unisuper, expressed his surprise at the TSMC news, remarking, “The one thing you were almost certain of was that demand for semiconductors was only one way.”
Hong Kong’s Hang Seng index edged down by 0.1%, with tech stocks in the subindex falling by 0.6%. Meanwhile, an index of mainland blue chips recorded a 0.3% decline.
Chinese property stocks displayed volatility, with a subindex of Hang Seng developers initially dropping by as much as 1.2% before recovering to positive territory around midday, ultimately closing down 0.4%.
Australia’s stock benchmark declined by 0.4%, under the weight of pessimism regarding Chinese demand, primarily impacting mining stocks.
Amid these challenges, there were glimmers of optimism. Country Garden received approval from creditors to extend the repayment period on another onshore bond, marking the last in a series of eight bond extensions the company had been seeking. Additionally, Sunac China Holdings secured creditor approval for its $9 billion offshore debt restructuring plan, signaling the first green light in a major Chinese developer’s debt overhaul.
The softness in Asian equities had a bearing on U.S. stock futures, which pointed 0.1% lower. Pan-European Stoxx 50 futures, however, remained stable.
Currency markets exhibited muted activity, with the U.S. dollar index, measuring the currency against six major peers, climbing by 0.09% to 105.17, inching closer to last week’s six-month peak of 105.43. The dollar strengthened by 0.1% against the yen, reaching 147.75, nearing the previous week’s 10-month high of 147.95. Meanwhile, the euro eased by 0.1% to $1.0679.
Ten-year yields exhibited minimal change, hovering just above 4.31%, closely mirroring the 4.366% level reached on Aug. 22, which marked the highest since 2007.
As the Federal Reserve headlines a series of central bank meetings this week, traders remain mostly convinced that the Fed will maintain rates at their current levels following a two-day meeting beginning later on Tuesday. Nevertheless, opinions differ regarding the likelihood of another quarter-point rate hike by year-end. Alongside rate decisions, Fed officials will release their latest economic forecasts and rate projections.
In the energy sector, oil prices continued their ascent on Tuesday for the fourth consecutive session. Weak shale output in the U.S. raised concerns about a supply deficit, attributable to prolonged production cuts by Saudi Arabia and Russia. U.S. West Texas Intermediate crude futures climbed by 1.1% to $92.47, while global oil benchmark Brent crude futures recorded a 0.61% increase, reaching $95.01 per barrel.
Capital.com’s Kyle Rodda noted, “Given how supply-constrained energy markets are likely to become, especially amidst harsher weather approaching the end of the year, higher oil prices are both an upside risk to inflation and a downside risk to growth. Markets that don’t export energy and suffer from energy insecurity could underperform.”
