Monday 16 September 2019

Asia shares sink as global growth worries deepen

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)
Independent.ie Business Desk

Independent.ie Business Desk

Asian share markets sank on Tuesday as heightened worries about a slowing global economy sent Wall Street stocks skidding to their lowest levels in more than a year.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.9pc in mid-afternoon trade while Japan's Nikkei lost 1.8pc to close at its lowest since late March.

European shares are expected to start in negative territory, with spread-betters expecting Britain's FTSE to open 0.8pc lower and Germany's DAX and France's CAC to give up 0.6pc each.

Chinese shares slumped, with the blue-chip index dropping 1.1pc and Hong Kong's Hang Seng index down 1.2pc, while Australian shares also lost 1.2pc.

Markets did not find any relief after a highly-anticipated speech by Chinese President Xi Jinping on Tuesday.

MSCI's broadest gauge of the world's stock markets, ACWI , was down 0.2pc on Tuesday, after having hit its weakest level since May 2017 the previous day. It has declined 16pc from a top hit on January 29.

US stock futures last traded around flat on the day after erasing gains of up to half a percent booked earlier in the session.

On Monday, the S&P 500 lost 2.08pc to hit its lowest since October 2017 as it breached lows reached during a sell-off in February, having wiped out about $3.4trn of market value since late September.

The Nasdaq Composite dropped 2.27pc, with Amazon, one of the best performing shares this year, sliding 4.5pc.

A profit warning from ASOS, a previously high-flying UK online-clothing retailer, shocked investors, sending US consumer discretionary shares down 2.8pc.

"US retailers have been stocking up consumer goods from China before hikes in tariff, piling up inventories. From now their costs are seen rising next year. That may have been kind of known to everyone but it's becoming reality," said Tatsushi Maeno, senior strategist at Okasan Asset Management.

In addition, the National Association of Home Builders Housing Market Index indicated US homebuilder sentiment had fallen to a three-and-a-half-year low. It was the second consecutive month of disappointing reading.

The gloomy data came after weak economic news from China and Europe late last week.

"The likelihood is growing that more weak figures will come out compared to what is currently being expected," said Harumi Taguchi, principal economist at IHS Markit, adding that she sees a rising risk that next year's global economic conditions will be weaker than what's expected now.

The 10-year US Treasuries yield dropped to 2.841pc, edging near a December 10 low of 2.825pc, its lowest level since late August.

FOCUS SHIFTS TO FED

The Federal Reserve is widely expected to raise interest rates on Wednesday, which would be its fourth hike this year.

But many investors now expect signs of economic turbulence to prompt the Fed to signal a slowdown in the pace of tightening next year.

On Monday, US President Donald Trump and his top trade adviser ratcheted up their criticism of the central bank's monetary tightening.

"It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!" Trump wrote in a tweet.

White House trade adviser Peter Navarro amplified those remarks a few hours later, calling the Fed "crazy" for having signalled that it would continue to raise rates next year.

The Fed said in September that its policymakers see three more rate hikes in 2019 while money market futures are pricing in less than one such move.

"The major event between now and the end of the year is going to be what the Fed does tomorrow," said Jim McCafferty, Hong Kong-based head of Asia-ex-Japan equity research at Nomura.

"Given the pace of change of sentiment seen from not just companies but (also) from major macro-economies, I think there might be an outside chance that the Fed gives a more muted message in terms of growth and how aggressive it will be in terms of future rate hikes," he added.

The spectre of a "dovish rate hike" kept the dollar in check.

The euro was largely steady at $1.1342, after having gained 0.4pc on Monday.

The greenback lost 0.2pc against the Japanese yen to 112.53 yen, adding to Monday's fall of nearly half a percent.

The offshore Chinese yuan was slightly stronger at 6.8935 to the dollar.

China's Xi on Tuesday called for the implementation of reforms but offered no new specific measures in a speech that marked the 40th anniversary of the country's move towards market liberalisation.

China is also expected to hold its annual Central Economic Work Conference later this week, where key growth targets and policy goals for 2019 will be discussed.

Oil prices extended losses on signs of oversupply in the United States and as investor sentiment remained under pressure from concern over global economic growth and fuel demand.

US crude fell as low as $48.52 per barrel on Tuesday, its lowest since September last year and last stood at $49.00, down 1.8pc on the day.

Brent crude oil futures lost 92 cents, or 1.5pc, to $58.69 per barrel.

Reuters

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