Asia stocks down as pol­icy fears re­turn

Kuwait Times - - BUSINESS -

Ex­pec­ta­tions the US will hike in­ter­est rates and the EU will also tighten mon­e­tary pol­icy dragged most Asian and Euro­pean mar­kets lower yes­ter­day, but Tokyo chalked up a third-straight gain as a weaker yen helped ex­porters.

The dol­lar pushed on with this week’s rally against global cur­ren­cies, in­clud­ing hit­ting an­other three-decade high against the be­lea­guered pound.

In­vestors were given a weak lead by their US coun­ter­parts af­ter com­ments from two top Fed­eral Re­serve of­fi­cials fanned spec­u­la­tion it will lift bor­row­ing costs be­fore the end of the year. Talk of an in­crease re­turned af­ter data last week showed US fac­tory ac­tiv­ity re­bounded in Septem­ber, while trad­ing floors gear up ahead of a cru­cial jobs re­port Fri­day.

On Tues­day Cleve­land Fed pres­i­dent Loretta Mester said she saw a strong case for a rate hike in Novem­ber. They were fol­lowed by Rich­mond Fed head Jef­frey Lacker, who said a rise was needed to avert a surge in in­fla­tion that could lead to sharp rate hikes later. “A De­cem­ber rate hike seems al­most cer­tain, and it sounds like that may be fol­lowed by two more rate hikes next year in­stead of one,” Chi­hiro Ohta, a Tokyo-based se­nior strate­gist at SMBC Nikko Se­cu­ri­ties, told Bloomberg News.

Bloomberg also cited un­named Euro­pean Cen­tral Bank of­fi­cials on Tues­day as say­ing there was an “in­for­mal con­sen­sus” that it should grad­u­ally scale back its bond-buy­ing pro­gram in steps of 10 bil­lion eu­ros. The news from Europe and the US comes as an­a­lysts warn the years of cheap cash are likely com­ing to an end, with the US econ­omy pick­ing up.

Dol­lar ral­lies

Talk of higher US rates has boosted the dol­lar this week and on Wed­nes­day it toyed with 103 yen in the morn­ing be­fore dip­ping back to 102.90 yen, slightly up from its level in New York. The green­back also stormed higher against higher-yield­ing Asia-Pa­cific cur­ren­cies, in­clud­ing the Aus­tralian dol­lar, South Korean won, In­done­sian ru­piah and Malaysian ring­git.

Ja­pan’s ex­porters were lifted by the weaker yen, send­ing the Nikkei stock index to end up 0.5 per­cent, ex­tend­ing a rally to three-straight days. Hong Kong posted a third gain, adding 0.4 per­cent, with the Hang Seng buoyed by re­cent up­beat China data and the im­pend­ing open­ing of a link-up with the Shen­zhen stock ex­change that could see fresh funds flood in. But most other Asian mar­kets strug­gled. Syd­ney fell 0.6 per­cent, Seoul lost 0.1 per­cent, Manila tum­bled 1.2 per­cent and Welling­ton was off 1.1 per­cent. Sin­ga­pore was flat.

In early Euro­pean trade Lon­don dipped 0.1 per­cent, Frank­furt slid 0.8 per­cent and Paris shed 0.9 per­cent. “We’ve been at an in­flec­tion point in fi­nan­cial mar­kets for a few weeks now, with mar­ket par­tic­i­pants sens­ing a chang­ing tide among cen­tral banks,” Chris We­ston, chief mar­kets strate­gist at IG Ltd. in Mel­bourne, said in an e-mail to clients.

The pound tum­bled briefly to a fresh 31year low be­low $1.27 af­ter Bri­tish Prime Min­is­ter Theresa May set out a timetable for leav­ing the Euro­pean Union by 2019. It was also at three-year lows against the euro, with talk of tighter ECB pol­icy adding to the pound’s woes. The stronger dol­lar also sent gold tum­bling al­most $39 Wed­nes­day to $1,270, its low­est lev­els since mid-June, be­fore Bri­tain’s shock vote to leave the EU sent deal­ers rush­ing for safe haven in­vest­ments. —AP

TOKYO: An elec­tron­ics quo­ta­tion board dis­plays the cur­rent ex­change rate of the Ja­panese yen against the Bri­tish pound (R) and the euro. —AFP

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