MW: Asian stocks mostly fall on global growth jitters
U.S. dollar strengthens as investors flee to safer assets
Shares in Australia fell by their sharpest in more than a week and led most Asian markets lower on Monday, as anxiety about the pace of global growth sent investors fleeing to safer assets, including the U.S. dollar.
Australia’s S&P ASX 200 XJO, -2.02% fell 2% to end at 5066.2. Hong Kong’s Hang Seng Index HSI, -0.75% closed down 0.8% and South Korea’s Kospi SEU, -1.57% was down 1.6%.
Japanese markets were closed for a holiday and will reopen Thursday.
“The Australian market traded lower from the get-go,” Tony Kwok, a sales trader at CMC Markets in Sydney, said. “The commentary from the Federal Reserve last week has truly shaken investors’ outlook on the economic health of the world economy.”
Australia’s mining and energy shares were caught up in the global-growth worries, at a time when several of Australia’s biggest commodity exports have excess supplies. Banking stocks were also down steeply in a broad selloff, as threats to the local economy, including the property market, appeared to weigh on the minds of investors, said Angus Nicholson, a market analyst at IG in Melbourne.
“With the outlook for financials, materials and the energy sectors all fairly negative over the next few months, we are unlikely to see the ASX returning to its April-May highs just below the 6000 mark, and indeed a significant break below 5000 could well be in the offing,” Mr. Nicholson said.
The Wall Street Journal Dollar Index BUXX, +0.17% , which gauges the U.S. currency against a basket of 16 currencies, was up 0.4% compared with late Friday in Asia. It earlier hit multiweek lows in the wake of the U.S. Federal Reserve’s decision to keep interest rates on hold. Lower rates for a longer time are a drag on the dollar, as they make the currency less attractive to investors seeking yield.
The Fed’s decision to keep rates steady on Thursday in part reflects concern about slowing growth in China and other emerging markets—concerns exacerbated last month by Beijing’s currency devaluation, which set off wild market swings. U.S. stocks tumbled Friday to their biggest one-day loss in two weeks.
The European Central Bank’s chief economist weighed in on the Fed’s worries about the global economy Saturday, saying the ECB is ready to expand stimulus measures if needed to ensure that inflation returns to the bank’s target of near 2%.
The re-election of Alexis Tsipras as Greek prime minister is expected to reassure financial markets, as well as officials in Europe, that Greece will stick to its bailout commitments and enter a period of greater political calm. But, the outcome of the vote, announced Sunday, puts Mr. Tsipras in place to carry out the very kind of harsh austerity that he was previously elected to resist.
The return of weakness in Asia comes after both Hong Kong and Australia notched their second consecutive week of gains last week.
“The Fed has pointed its finger at emerging markets which obviously has singled out China, as the largest emerging market player along with Southeast Asia” in its latest statement, said Evan Lucas, market strategist at brokerage IG, in a note. “That’s feeding through to Asian trading today, considering the concern is around growth and possible economic disruptions.”
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One potential market mover this week, he said, is the reading on Chinese manufacturing activity for the month of September, due Wednesday from Caixin Media Co. and research firm Markit Ltd. The August reading was the lowest in more than six years.
“People are very bearish on China,” added Mr. Lucas. “It’s possibly overdone.”
Another measure, from China Beige Book International, showed manufacturing putting in its most sluggish performance in two years during the July-September quarter, although services remained strong. And while China exports were weaker, they were a less significant driver of overall growth, the group said. The results are based on a survey of more than 2,100 businesses.
U.S. stocks tumbled Friday to their biggest one-day loss in two weeks, and fund managers and traders piled into bets reflecting the belief that interest rates will remain low for a long time.
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On Monday, the Shanghai Composite Index SHCOMP, +1.89% closed up 1.9%, bucking regional losses. Its gains came late within the last hour of trade, a frequent buying-window for Beijing-backed funds to support the market.
The Shanghai benchmark shed 3.2% last week, as brokers cited investor nervousness about the Fed’s decision and some weakness in economic data.
