Asia: Stocks, currencies fall as strong data fans hawkish Fed bets

ASIAN stocks fell on Wednesday (Sep 7) as investors failed to find any cheer in strong US economic data and instead considered what it might mean for a hawkish Federal Reserve, with a surging dollar weighing heavily on regional currencies.

Tracking Wall Street’s losses, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 1.5 per cent in early trading and Japan’s benchmark Nikkei average opened down 1.12 per cent.

Fixed-income markets came under heavy pressure with US 10-year treasuries yields rising to 3.365 per cent on Wednesday, the highest since Jun 16.

Data overnight showed the US services industry picking up in August for the second straight month amid stronger order growth and employment.

While that reinforced views the economy was not in recession, it also added to expectations the US central bank would not be slowing the pace of interest rate hikes any time soon.

“The good news for the real economy has now become bad news for the market - both for the bond and the stock market,” said Redmond Wong, Hong Kong-based Market Strategist of Greater China at Saxo Capital Markets.

Weaker than expected jobs data last week ignited hopes the Fed may consider a soft landing with slower rate hikes, but “that hope pretty much vanished again” on the new set of numbers, he added.

“Investors we talked to ... have lost quite a bit of confidence in the (stock) market,” Wong said, adding investors have shown renewed interest in high-grade bonds to gain cash flow from coupons.

Australia’s S&P/ASX 200 lost 1.29 per cent. Its economic growth in the second quarter this year picked up speed, offering hope activity can weather sharply higher interest rates and cost-of-living pressures.

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Shares in Hong Kong fell 1.35 per cent with its main tech index losing 1.9 per cent.

China’s benchmark edged down 0.11 per cent on concerns about fresh Covid restrictions on large mainland cities such as Guiyang, following a full lockdown of the southwest city of Chengdu.

Asian currencies tumbled against the dollar due to a surge in the US bond yields.

The Japanese yen hit a fresh 24-year low of 143.57 per dollar and China’s yuan weakened 0.25 per cent to 6.96 against the dollar, approaching the psychologically important 7 mark.

Chinese authorities have already signalled concerns about the currency’s aggressive declines.

In energy markets, crude oil prices stumbled on weaker consumption forecasts. US crude fell 1.22 per cent to US$85.8 per barrel and Brent was at US$92, down 1 per cent on the day.

Spot gold lost 0.4 per cent to US$1,694 an ounce. REUTERS