[WASHINGTON] Asian stocks fell and the dollar weakened against major peers as the Federal Reserve's timidity toward raising interest rates underscored global growth concerns that have sent emerging-market assets and commodities tumbling.
The MSCI Asia Pacific Index touched its lowest level since January as stock gauges from Sydney to Singaore, Tokyo and Shanghai retreated. The greenback was weaker against 11 of 16 major currencies by 10am in Hong Kong after minutes of the Federal Reserve's July meeting showed concern over slow inflation. U.S. oil fell toward $40 a barrel on an unexpected increase in American stockpiles. The cost of insuring Asian debt against default rose to a 10-month high.
"As we look around the world, and we look at what commodities are doing and we look at what energy is doing, the fact is demand at best is anemic," Ted Weisberg, president of Seaport Securities Corp in New York, told Bloomberg TV's Shery Ahn. "A bigger problem for not only the Fed, but for central bankers everywhere, is deflation."
Odds on a September rate increase were reduced on Wednesday after Fed officials said while conditions for a hike were approaching, they needed more confidence inflation was climbing
. The meeting occurred before China's yuan devaluation on Aug 11 also prompted a scaling back of bets on higher US rates amid concern the slowdown in the world's second largest economy will push down prices across markets.
Eight of the 10 industry groups on the Asia-Pacific stock gauge dropped. The Hang Seng Index in Hong Kong and Taiwan's Taiex Index are both more than 19 percent below April peaks, close to passing the 20 per cent threshold some investors use to define the beginning of a bear market.
Japan's Topix gauge, Australia's S&P/ASX 200 Index and the Kospi index in Seoul falling at least 0.6 per cent. Standard & Poor's 500 Index futures added 0.1 per cent after a 0.8 per cent decline in the New York benchmark.
Economic conditions were "approaching that point" where policy tightening could be warranted, Fed officials said.
Still, they were silent on whether they should act in September, or wait until they have more evidence that inflation is accelerating, the minutes showed. The chance of an increase next month is now at 36 per cent, according to Fed fund futures, down from around 50 percent earlier this month.
The Bloomberg Dollar Spot Index, a gauge of the US currency against 10 major peers, was little changed after slipping 0.3 per cent on Wednesday. US consumer-prices data Wednesday cast doubt on how quickly inflation will return toward the Fed's 2 per cent target.
China's yuan slipped 0.1 per cent to 6.3995 per dollar in Hong Kong trading. The International Monetary Fund pushed back until the end of September 2016 the earliest date by which the yuan could be included in its special basket of reserve currencies. The decision was in line with recommendations from staff study two weeks ago.
West Texas Intermediate crude fell a second day, losing 0.6 per cent to US$40.54 a barrel, near the lowest price this year, following a 4.3 per cent tumble on Wednesday that was the steepest one-day retreat since July 6. Brent oil lost 0.5 per cent to US$46.93, extending its lowest settlement since January.
A surprise 2.62-million barrel increase in US oil inventories fueled the losses, with analysts projecting an 820,000-barrel drop. Energy producers and mining companies led declines in the S&P 500, with both industry groups down at least 1.2 per cent. Oil has fallen 30 per cent from this year's peak amid mounting concern over a global glut in the commodity.
"What won't be lost on investors is that US oil prices have fallen nearly 16 per cent since the July FOMC meeting," Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., said in a client note. "This will prove disinflationary."
Gold held gains after the selloff in raw materials and emerging-market assets boosted demand for haven assets. The precious metal jumped 1.5 per cent in the spot market Wednesday, and was little changed at US$1,134.91 an ounce Thursday, close to its highest level in about a month. Gold futures for December delivery climbed 0.6 per cent.