Asian Shares Slump As Powell Warns Of Economic Pain

Asian Shares Slump As Powell Warns Of Economic Pain

September 5, 2022

Asian stocks tumbled on Monday, as U.S. Treasury yields rose and the dollar index traded at its highest level in over 20 years after the head of the U.S. Federal Reserve indicated high interest rates will continue for some time to curb inflation.

Fed Chair Jerome Powell on Friday pledged that the central bank would use all tools forcefully to attack inflation, dashing hopes the central bank would soften its rate hike stance to support growth.

Traders now see greater odds of a 75 basis point rate hike in September, taking the rate to a range of 3.75- 4 percent by the end of the year.

Much might depend on what the August payrolls figures show this Friday, with analysts looking for a moderate rise of 285,000 jobs following July’s blockbuster 528,000 gain.

Chinese shares reversed early losses to end 0.1 percent higher at 3,240.73 as the yuan weakened significantly – hitting its lowest level since August 2020 on the hawkish comments by the Fed Chief.

Over the weekend, official data showed that profits of China industrial firms had fallen by 1.1 percent from January to July, from a year earlier.

Hong Kong’s Hang Seng index shed 0.7 percent to close at 20,023.22.

Japanese shares plummeted and the dollar hit a five-week peak against the yen as Powell’s interest rate warning added to concerns over slowing global growth.

The Nikkei 225 Index plunged 2.7 percent to 27,878.96, reaching its lowest level in three weeks and marking its biggest single-day loss in more than two months.

The broader Topix ended 1.8 percent lower at 1,944.10. Tech stocks suffered heavy losses, with Advantest, Screen Holdings and Tokyo Electron tumbling 4-5 percent.

Seoul stocks fell sharply to snap a three-day winning streak. The Kospi ended 2.2 percent lower at 2,426.89, while the Korean won hit its lowest level against the U.S. dollar in 13 years. Samsung Electronics, SK Hynix, Naver and Kakao lost 2-5 percent.

Australian markets ended lower, with technology companies, miners and financials leading losses. The benchmark S&P/ASX 200 Index tumbled 2 percent to 6,965.50, while the broader All Ordinaries index closed 2.1 percent lower at 7,193.40.

Fortescue Metals gave up 4.9 percent after the iron ore miner reported a dip in its annual profit.

Preliminary data showed earlier in the day that Australian retail sales rose 1.3 percent sequentially in July, well above expectations for a 0.3 percent increase.

Across the Tasman Sea, New Zealand’s S&P/NZX-50 Index slid 0.9 percent to settle at 11,506.94. Infant formula maker A2 Milk soared 9.7 percent on share buyback news.

In the U.S., the Dow fell 3 percent on Friday, the S&P 500 plunged 3.4 percent and the tech-heavy Nasdaq Composite index lost 3.9 percent after Powell reiterated a hawkish tone on inflation and interest rates.

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