Asian stocks decline, dollar firms amid growth concerns, Fed outlook

A man watches stock prices on an electronic board outside a brokerage firm, in Tokyo, Japan, March 20, 2023. REUTERS/Androniki Christodoulou/File Photo Obtaining licensing rights

HONG KONG (Reuters) – Asian stocks fell on Wednesday after faltering growth in China and Europe exacerbated concerns about global economic momentum, while the dollar rose as investors weighed the Federal Reserve’s (US central bank) interest rate outlook.

London and US markets are set to open lower with FTSE futures and S&P 500 E-mini futures down 0.42% and 0.13% respectively at 0520 GMT.

MSCI’s gauge of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 0.45%.

The Hang Seng Index (.HSI) lost 0.56% and China’s benchmark CSI300 Index (.CSI300) fell 0.59%, ahead of China’s August trade data due on Thursday, with analysts expecting exports and imports to continue their declines, but at a slower pace.

Investor sentiment was dampened by a private sector survey on Tuesday that showed services activity in China expanded at the slowest pace in eight months in August, reflecting weak demand.

“The decline in China was larger than expected,” said Redmond Wong, Greater China market strategist at Saxo Markets.

“The Chinese government has become more active and is easing more regulatory restrictions, but whether it is good enough remains to be seen,” he added.

China is also scheduled to publish lending and inflation data in the coming days.

Manufacturing data from Germany, Britain and the Eurozone also showed declines, while the service sectors in these countries declined.

“European data has been fairly weak. We believe there is still a high chance of a moderate recession in the US and Europe towards the end of the year or the beginning of next year,” Wong said.

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Australia’s S&P/ASX 200 index extended its losses to 0.76%, even as second-quarter GDP exceeded expectations for a 0.4% rise.

Japan’s Nikkei 225 index (.N225) rose 0.52% with the weakest yen since November, boosting exporters such as automakers, while energy stocks outperformed amid rising crude oil prices.

The yield on the benchmark 10-year US Treasury note rose 9 basis points to 4.26% after reaching 4.268%, its highest level since August 25, while the US dollar rose to its highest level in almost six months against a basket of currencies.

Investors are digesting recent signals about a possible US interest rate hike. Federal Reserve Governor Christopher Waller said Tuesday that the latest round of economic data gives the U.S. central bank room to see if it needs to raise interest rates again.

“[The] “The Fed is the focus of our attention, and we believe they have more work to do with US interest rates likely to continue to rise,” said John Milroy, investment advisor at Ord Minute.

“We see central banks having to keep policy tight to counter inflationary pressures,” BlackRock Investment Institute said in a note on Wednesday.

The Institute for Supply Management (ISM) is scheduled to release its Purchasing Managers’ Index (PMI) for US services on Wednesday.

US crude rose 0.06 percent to $86.74 a barrel. Brent gained 0.07 percent to trade at $90.10 a barrel.

Oil prices rose more than one percent in the previous session, with markets concerned about supply shortages after Saudi Arabia and Russia extended their voluntary supply cuts until the end of the year.

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Gold rose in instant transactions by 0.09 percent to $1,927.79 per ounce by 0534 GMT, after suffering the largest loss in one day on Tuesday since August 1.

Ken Wu reports. Edited by Edmund Claman and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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