As a result of fresh evidence of persistent inflationary pressures in the United States, which strengthened the case for maintaining high interest rates for longer, Asian equities fell on Thursday, extending global equity drops.
In relation to major peers, the U.S. dollar hovered near its best level since mid-March, and it reached a new 10-month high against the yen. The two-week highs of the long-term Treasury yields were around 4.3%.
Concerns about inflation increased as Brent crude remained above $90 despite a decreasing supply.
Following drops on Wall Street and in Europe, MSCI’s broadest index of Asia-Pacific equities fell 0.45%.
The Hang Seng in Hong Kong fell by about 1%. Mainland Blue-chip stocks in China fell 0.8%. Benchmark in Australia fell by 1.1%
The Nikkei in Japan fell by a more manageable 0.2%, but it put an eight-session winning streak in jeopardy.
U.S. stock futures indicated a 0.1% fall, which came after the S&P 500 fell 0.7% overnight.
After U.S. data revealed that the services sector unexpectedly gained momentum in August, which suggested persistent inflationary tendencies, Wall Street stocks fell.
The likelihood of a rate increase before year’s end, according to traders, is closer to a coin toss even if they are still reasonably confident the Federal Reserve won’t raise rates this month. Rate reduction is not anticipated until June.
The struggle against inflation hasn’t been won, the data suggests, according to Kyle Rodda, senior financial markets analyst at Capital.com in Melbourne.
It all comes down to the debate about the location of the enchanted neutral rate, he added. While the markets are still gauging where that rate might be, it will weigh on stocks and strengthen the dollar.
The dollar index, which compares the dollar to six developed-market currencies, including the euro and yen, remained unchanged at 104.85 on Thursday after reaching its highest level since March 15 on Wednesday at 105.03.
Prior to that, at 147.875, the dollar reached its best level against the yen since November 4.
The long-term Treasury yield, which was at 4.29% on Thursday after climbing to its highest level since August 23 at 4.306% in the previous session, tends to rise in tandem with the currency pair.
In contrast, the euro, which on Wednesday fell to a three-month low of $1.0703, was barely changed at $1.0724.
Another effort to support the yuan was made by the People’s Bank of China, which once more set firm official midpoints for the currency.
Despite those initiatives, the yuan has remained in offshore trading on the weaker side of the carefully watched 7.3 per dollar threshold, recently transacting at 7.3274. In the middle of last month, it fell to 7.3490, its lowest level since early November, as a result of the rapidly worsening real estate market and the possibility of a spillover into other markets.
Although not as bad as economists had anticipated, the China trade figures released on Thursday nonetheless showed a decline in exports of almost 9% and an increase in imports of more than 7%.
The Australian dollar, which frequently acts as a stand-in for that of its main trading partner, fell 0.2% to $0.6371, maintaining its proximity to this week’s 10-month low.
After Saudi Arabia and Russia earlier this week extended voluntary production curbs to the end of the year, crude resumed its steady ascent of the previous two weeks, pushing higher despite predictions of a decline in U.S. stockpiles. [O/R]
The price of Brent oil futures increased by 12 cents to $90.72 a barrel, while the price of WTI futures increased by 11 cents to $87.65.