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Asian market sell-off picks up pace, Shanghai tumbles
HONG KONG, Oct 8, 2018 (BSS/AFP) – Asian markets fell on Monday, extending
last week’s sell-off as another strong US jobs reading further fanned
expectations the Federal Reserve will hike interest rates at a quicker pace.
Shanghai led the retreat as mainland investors returned from a week-long
break, during which time China was accused of using microchips in computer
equipment sold in the US as part of a drive to steal technology secrets.
The losses in China also came despite a cut in the amount of cash the
country’s commercial banks must keep in reserve, which its central bank says
will pump more than $100 billion into financial markets.
Dealers were given a negative lead from Wall Street, where all three main
indexes ended with sharp losses following news that unemployment had hit a
49-year low and wages saw healthy gains.
The report, which followed a slew of strong indicators on the world’s top
economy, saw yields on benchmark 10-year Treasuries rise for the third
straight day, hitting a fresh seven-year high with the Fed expected to stick
to its rate hike drive.
Analysts said the sudden surge in interest rates had deepened worries
about higher inflation and an uptick in costs for loans and mortgages.
Richard Jerram, chief economist at Bank of Singapore, said while the Fed
would not be panicked by the increase in wages “evidence that tight capacity
conditions — such as a low unemployment rate — are pushing prices higher
will keep them on the current tightening path.
“Another rate hike in December seems very likely, and we expect four more
in 2019.”
– More help needed –
The losses in New York seeped into Asia, where Shanghai sank 3.7 percent,
while Hong Kong lost 1.4 percent with property firms hit by expectations the
city’s banks will lift mortgage rates again as they track a likely Fed hike.
The Hang Seng has lost more than five percent over the past five trading
days.
Sydney retreated 1.4 percent, Singapore eased 0.5 percent, and Taipei and
Seoul were each 0.6 percent lower.
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ASIA-MARKETS-UPDATE 2 LAST HONG KONG
Tokyo was closed for a public holiday.
Chinese dealers were playing catch-up with sharp losses last week, when
Bloomberg reported that Beijing inserted microchips into equipment made in
China for Amazon and Apple, and possibly for other companies and government
agencies.
It claimed a unit of the People’s Liberation Army was involved in the
operation that looked to steal tech secrets. Mainland tech firms tumbled
across the board, while companies in Hong Kong and Taipei including Lenvo and
Taiwan Semiconductor Manufacturing also extended Friday’s sharp losses.
The selling trumped news that the People’s Bank of China had lowered the
required reserve ratio (RRR) as it looks to shore up the economy after a
series of weak data, while it also battles a long-running trade row with the
United States.
However, Stephen Innes, head of Asia-Pacific trading at OANDA, said: “It’s
not too much of a stretch to assume markets should expect more policy easing
measures and increased infrastructure spending. The RRR cut will help but the
China economy will need more monetary policy persuasion to snap its current
funk.”
Oil prices fell after the crown prince of major producer Saudi Arabia said
it could access spare capacity to fill in for any shortages from Iran when US
sanctions are imposed on the country next month.
Adding to the weakness were reports that Washington was holding
discussions with countries that want to carry on buying crude from Iran past
the November 4 imposition of sanctions.
“It’s still a wait-and-see as to how much production will be boosted, so
investors are likely to be cautious and trade in a narrow range until we get
some more clarity next month,” Will Yun, a commodities analyst at Hyundai
Futures, told Bloomberg News.
In early European trade London fell 0.4 percent, while Paris and Frankfurt
each shed 0.7 percent.
– Key figures around 0810 GMT –
Hong Kong – Hang Seng: DOWN 1.4 percent at 26,202.57 (close)
Shanghai – Composite: DOWN 3.7 percent at 2,716.51 (close)
Tokyo – Nikkei 225: Closed for a holiday
London – FTSE 100: DOWN 0.4 percent at 7,293.19
Euro/dollar: DOWN at $1.1487 from $1.1520 at 2050 GMT on Friday
Pound/dollar: DOWN at $1.3056 from $1.3115
Dollar/yen: UP at 113.74 from 113.66 yen
Oil – West Texas Intermediate: DOWN 73 cents at $73.61 per barrel
Oil – Brent Crude: DOWN $1.05 at $83.11 per barrel
New York – Dow Jones: DOWN 0.7 at 26,447.05 (close)
BSS/AFP/HR/1430