Asian stocks slide with oil on recession jitters; dollar drops

Asian stocks slide with oil on recession jitters; dollar drops

MSCI’s broadest index of Asia-Pacific shares retreated 0.8 per cent. ― Reuters file pic

Tuesday, 02 Aug 2022 10:21 AM MYT

TOKYO, Aug 2 ― Asia stocks continued a decline from Wall Street today, and US long-term Treasury yields sank to a four-month low, pulling the US dollar down against the yen and other currencies as investors worried about the risk of global recession.

There were also jitters about an escalation in Sino-US tension with US House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan against the objections of China, which regards the self-governed island as a breakaway province.

Australian equities declined amid an uncertain outlook for commodity demand ― which also weighed on crude oil prices ― while the local dollar hovered near its highest versus its US counterpart since mid-June with the central bank widely expected to deliver a third consecutive half-point interest rate hike later in the day.

The Australian and South Korean equity benchmarks suffered losses of about 0.3 per cent each, while Japan’s Nikkei tumbled 1.17 per cent.

Chinese blue chips dropped 1.06 per cent and Hong Kong’s Hang Seng lost 1.1 per cent.

Taiwan’s stock index slid 1.68 per cent.

MSCI’s broadest index of Asia-Pacific shares retreated 0.8 per cent.

US e-mini stock futures pointed to a 0.31 per cent lower restart for the S&P 500, which stumbled 0.28 per cent overnight.

The week began with China, Europe and the United States reporting weakening factory activity, with that in the US decelerating to its lowest level since August 2020.

That sank crude, with Brent futures edging down to US$99.74 (RM444.50) today after losing almost US$4 overnight. US West Texas Intermediate futures also eased to US$93.67, extending yesterday’s almost US$5 slide.

“Data releases over the past 24 hours have provided further evidence the global economy is slowing,” National Australia Bank strategist Rodrigo Catril wrote in a note to clients.

“Signs of a slowdown are building” in the United States, while “China’s reopening activity burst is over,” he said.

The benchmark 10-year US Treasury yield fell as low as 2.53 per cent in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the US Federal Reserve to ease its foot off the policy-tightening pedal. The bonds also benefited from safety-seeking demand before Pelosi’s Taiwan visit, analysts said.

That helped the US dollar slide as low as ¥130.595 for the first time since June 6. The euro jumped as high as US$1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per US dollar.

Meanwhile, the Aussie was more subdued, retreating 0.26 per cent to US$0.7009, but after hitting the highest since June 17 at US$0.7048 in the previous session.

Analysts polled by Reuters expect the Reserve Bank of Australia to hike by 50 basis points both today and again at its next meeting in September as it races to rein in inflation.

Market participants also see a half-point bump later as a certainty, and have priced an additional 37 basis points of tightening for the September decision. ― Reuters