Asian stocks find their way, but prevailing nervousness keeps dollar firm
HONG KONG (Reuters) – Asian stocks managed to recover some of this week’s heavy losses on Thursday, but were heading into their worst quarter since the start of the pandemic, as the dollar held close to a high in one year, helped by strong demand for safe haven and the outlook for rate hikes in the United States.
US and European equity futures were also higher with S&P 500 e-minis up 0.8%, Euro Stoxx 50 pan-regional futures gaining 0.76% and FTSE futures advancing 0.54%.
The largest MSCI index for Asia-Pacific equities excluding Japan gained 0.33%, but was still pegged for a monthly decline of 4.4% and a loss of 9.3% for the quarter.
It would be the benchmark’s worst quarter since the first three months of 2020, as COVID-19 raged in Southeast Asia and investors worried about slowing global growth, with China in particular worrying. The Chinese economy has been hit by regulatory restrictions in the tech and real estate sectors and is now struggling with an electricity shortage.
Data released Thursday showed Chinese factory activity unexpectedly contracted in September, but services resumed expansion as COVID-19 outbreaks receded.
However, analysts say slower growth would push authorities to relax their policies. This gave the battered Chinese markets some breathing space, with the blue chips rising 0.6% and the Shanghai Composite Index gaining 0.7%.
“We believe China is at the inflection point for a more cyclical easing of its policy amid the ongoing rapid slowdown in growth,” Morgan Stanley analysts wrote in a note.
Elsewhere, the Hong Kong benchmark lost 0.3%, penalized by the drop in Chinese tech names, while Australia gained 1.9% and Korea’s KOSPI gained 0.3%.
The other main drag on investor sentiment in Greater China was struggling developer China Evergrande, whose shares hovered among themselves and fell 4.2% for the last time.
The company failed to pay bond interest due on Wednesday, two bondholders said, missing its second offshore debt payment in a week, despite the cash-strapped company struggling to meet its obligations in its domestic market .
The Nikkei lost 0.31% a day after the ruling party in Japan picked low-voice consensus builder Fumio Kishida as the country’s new leader and prime minister.
OVERVIEW OF THE DOLLAR
In forex markets, the dollar has retained strong recent gains in Asian times, with the dollar index – which measures the US dollar against six major currencies – at 94.304, just after a year high reached of overnight.
“(The dollar) is breaking through key levels and there was no real resistance to breakout, which tells you there was real strength behind that,” said Chris Weston, head of the search at the Melbourne broker Pepperstone.
“Sometimes it can kind of become a magic currency,” he said, pointing out that he was supported both by global investors seeking security and by the Fed moving closer to cutting back. its massive asset purchases.
In addition, “the current stalemate on the US debt ceiling could briefly amplify nervousness in financial markets and support the dollar in the short term,” CBA analysts said in a note.
U.S. lawmakers continue to wrangle over government funding, but face a Friday deadline to prevent a close approaching, which has also capped U.S. stock gains overnight.
The benchmark 10-year Treasury yield was 1.5167%, little changed on the day, after rising sharply at the start of the week.
Oil prices edged down, extending losses after official figures showed an unexpected rise in US inventories, reversing a string of recent gains.
Brent crude fell 0.5% to $ 78.25 a barrel while US crude fell 0.24% to $ 74.65. [O/R]
Spot gold was trading at $ 1,731.99 an ounce, breaking its seven-week low, but still limited by a strong dollar.