Most Asian markets fell on Monday as China’s decision to cut interest rates again failed to reassure investors, who have grown concerned about the outlook for the world’s second largest economy.
Sentiment was dampened this month by a series of weak data out of Beijing suggesting the post-COVID recovery is out of control.
Speculation that the Federal Reserve may tighten further and hike interest rates for some time has added to the gloom as it seeks to bring inflation down to its 2 percent target.
Wall Street delivered a modest lead as focus turns to a symposium of leading central bankers and business leaders in Jackson Hole, Wyoming, later in the week where traders are hoping for clues on interest rates.
“Recent comments suggest that central bankers will retain the flexibility to hike further while clearly avoiding committing to any rate cuts anytime soon,” said Saxo’s Redmond Wong.
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As the Fed and others mull more rate hikes, the People’s Bank of China announced another rate cut on Monday to boost the flagging economy.
The decision to cut the key one-year lending rate, which serves as a benchmark for corporate lending, comes after a cut in June and leaves it at historic lows.
However, the five-year LPR, which is used to price mortgages, was unchanged and the cuts were smaller than forecasters had predicted.
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The announcement did little to calm worried investors, who are calling for leaders to come up with more concrete measures to boost growth.
A number of pledges to revive the economy have been made, but without very detailed information.
In early trade, Hong Kong led the losses as the sell-off continued for the seventh straight day and the country was more than 20 percent below its January high.
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Shanghai was in the red, as were Sydney, Singapore and Wellington, although Tokyo, Seoul and Jakarta rose.
The Jackson Hole meeting is now firmly in traders’ sights as Fed Chair Jerome Powell and European Central Bank Governor Christine Lagarde are set to deliver speeches.
The meeting comes at a time when markets are pricing in expectations that borrowing costs will remain high for some time to come and officials are aiming to rein in inflation and keep it low.
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“We could see ourselves in that benchmark risk-free 5 percent rate environment for the foreseeable future — maybe mid-2024 or beyond,” said Jerome Schneider of Pacific Investment Management Co.
Tokyo – Nikkei 225: UP 1.0 percent at 31,748.88 (pause)
Hong Kong – Hang Seng Index: down 0.6 percent at 17,841.45
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Shanghai – Composite: DOWN 0.1 percent at 3,129.30
Euro/dollar: rise to $1.0882 from $1.0874 on Friday
Pound/dollar: rise to $1.2740 from $1.2736
Euro/pound: up to 85.41p from 85.37p
Dollar/yen: rise to 145.50 from 145.32 yen
West Texas Intermediate: up 0.9 percent to $81.42 a barrel
North Sea Brent crude up 0.9 percent to $85.57 a barrel
New York – Dow: Up 0.1 percent at 34,500.66 (close)
London – FTSE 100: down 0.7 percent at 7,262.43 (close)
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