Asia markets struggle as growth worries escalate

Asia

Visitors watch share prices at the Tokyo Stock Exchange. The Nikkei 225 closed down 0.5% to 21,638.16 points yesterday.

Uncertainty over the global economy weighed on Asian markets yesterday as the tailwind from the China-US trade ceasefire petered out, with oil prices struggling to claw back the previous day’s hefty losses and safe-haven gold rallying again. While some tensions on trading floors have eased since Donald Trump and Xi Jinping’s proclamation that negotiations were back on, analysts pointed to long-running concerns about weak growth and central banks’ willingness to act. Shanghai was one of the biggest losers after the head of the People’s Bank of China appeared to temper expectations for near-term stimulus measures for the world’s number-two economy. Yi Gang said growth was near potential, interest rates were about right and monetary policy was accommodative enough to absorb various situations.


“Gang sent more hawkish signals by tempering expectations for significant credit growth in (the second half of) 2019” following the positive outcome of the Trump-Xi meeting, said Stephen Innes at Vanguard Markets. “If this is true, it’s horrible for a market that was positioning for a fillip from a PBoC policy response and a noteworthy shift from his dovish remarks just a few weeks ago that there is ‘tremendous room’ for additional policy stimulus in China.” The remarks come soon after data showed factory activity in China continued to shrink in June, adding to worries about the key driver of global growth as economies struggle to deal with the effects of the trade war. Traders are also nervously awaiting the Federal Reserve’s next policy meeting this month, with a 25 basis point cut in borrowing costs largely priced into markets, but with many hoping for double that figure.


The release of US jobs data on Friday is now in investors’ sights, with a weak reading likely to put pressure on the bank to announce slash deep this month. Adding to the sense of dread, Bank of England boss Mark Carney warned of a “widespread” slowdown in the world economy from rising protectionism. His comments came as it emerged that the White House had proposed tariffs on $4bn in European imports over European subsidies for commercial aircraft. “Trade optimism is beginning to fade as the truce with China is not even a week old and the US is looking for its next trade battle,” said OANDA senior market analyst Alfonso Esparza. Hong Kong closed down 0.1%, while Shanghai ended 0.9% lower and Tokyo finished off 0.5%.Singapore fell 0.3%, Seoul dropped 1.2% and Taipei gave up more than 1% with Jakarta 0.5% lower. But Sydney was up 0.5%, while Manila, Mumbai and Bangkok also edged higher.


Gold prices, which fell this week from six-year highs as dealers shifted out of safe assets, resumed its upward trajectory, surging more than 2% yesterday to $1,415 per ounce. And the yield on US Treasury bonds, another go-to staple in times of turmoil, were at their lowest levels since November 2016, another indication of trader anxiety. Oil prices edged up slightly after data showed another drop in US stockpiles, but they were nowhere near biting into the more than 4% falls suffered on Tuesday on demand fears.The commodity has already had a volatile week, having surged on Monday on the back of the announcement by Russia and Saudi Arabia that they will extend their output caps. The move was confirmed by the two and other Opec members at the group’s meeting on Tuesday. “Growth concerns continue to weigh on the crude market and the markets are beginning to query to what extent can Opec+ continue to cut production in sustaining prices,” Howie Lee, an economist at Oversea-Chinese Banking Corp, told Bloomberg News. “Production levels have already been severely reduced and there is limited scope for further supply curbs.” In Tokyo, the Nikkei 225 closed down 0.5% to 21,638.16 points; Hong Kong — Hang Seng ended down 0.1% to 28,855.14 points and Shanghai — Composite closed down 0.9% to 3,015.26 points yesterday.

Sources and photo-credits: AFP, Gulf Times