© Stocksak. Passerby silhouettes are seen standing in front of an electronic monitor that displays Japan’s Nikkei shareaverage and world stockindices. This is October 21, 2022 REUTERS/Issei Kano
By Anshuman Daaga
SINGAPORE (Stocksak), Tuesday: Asian equities fell to a new 2-1/2-year low on Tuesday. Early gains fueled by Wall Street’s rally on Wall Street, which hoped the Federal Reserve would end aggressive rate increases, were offset by weakness of Chinese shares and the Yuan.
The U.S. Dollar fell against its major peers while the sterling hit new highs. This month’s highs were achieved after Rishi, Britain’s next prime minster, was set to take office. Sunak is seeking to restore stability to a country that has been in turmoil for years.
Sterling rose 0.3% to $1.13170, moving towards the Oct. 5 high of $1.1493 [USD/]
Equities in Asia were mixed, with Japan moving 0.7% forward and South Korea increasing 0.3%. Taiwan fell 0.7%, and Hong Kong lost 0.6%.
MSCI’s broadest index for Asia-Pacific shares fell 0.4% to 428.2 following a dip to 427.4, the lowest level since April 2020.
ING economists noticed widespread weakness in Monday’s Purchasing Managers Index (PMI), which was published across developed markets. However, they suggested that the sharp fall in the U.S. services sector PMI could be a silver lining in this negative news if it means slower Fed rises and perhaps a lower peak Fed Funds rate.
They added that this could be one reason equity markets are receiving some support.
The Asian benchmark has suffered losses of almost 32% this year due to big falls in Hong Kong shares, while emerging markets like India and Indonesia have seen their growth prospects improve.
However, Chinese stocks fell further Tuesday as concerns arose about the possibility that a more powerful Party leadership would increasingly prioritize the state at the expense of the private sector.
The benchmark index of mainland China dropped 0.6 and tumbled to another record low against dollar, falling to as low as 7.3650 dollars.
The delayed data on gross domestic products (GDP) showed that the Chinese economy grew 3.9% during the third quarter, exceeding forecasts of 3.5%. However, retail sales fell by 2.5%.
China’s share price fell to a low of 15 years after the central bank established the lowest midpoint in China since 2008, following Monday’s sale-off in Chinese assets.[CNY/]
U.S. shares extended their rally from last week and European shares rose. This was due to signs of a cooling U.S. economic environment that fueled hopes that the Federal Reserve would slow down its rate hikes. The shares gained 1.34%, 1.19%, and 0.86% respectively. The fourth consecutive month of U.S. business activity was a down month, suggesting that the Fed’s relentless interest rate increases are having their desired effect. The markets are still pricing in a rate increase of 75 basis points next month but have slowed down their bets on a matching move for December.
According to 49 of 80 economists surveyed by Stocksak, the funds rates were expected to peak at 4.50%-4.755% in Q1 2023.
The European Central Bank meets this week. It is widely expected to increase rates by 75 base points. Gold prices rose 0.1% to $1650.6 an ounce on commodities markets while benchmark futures remained steady at $93.2 per bar.