Tokyo, Oct 4 (BNA): Asian stocks fell on Monday, amid concerns over China’s real estate sector, inflation concerns over upbeat US data and positive news about new drugs to combat the coronavirus.
Trading in debt-laden China Evergrande shares has been suspended after it defaulted on a major interest payment on its foreign debt obligations for the second time last week.
Kazutaka Kubo, chief economist at Okasan Securities, said, “The biggest problem is not Evergrande default but the environment that led to its collapse. Authorities regulate housing loans and lending to real estate companies. Markets are already looking for the next Evergrande,” said Kazutaka Kubo, chief economist at Okasan Securities. . According to Reuters.
“There is an increased risk that Evergrande’s problems will spread to the entire Chinese real estate sector.”
MSCI’s broadest index of Asia Pacific shares outside Japan was down 0.3%. The index recorded its first quarterly decline in six quarters.
Hong Kong led the decline with a 1.9% drop in the Hang Seng Index. Japan’s Nikkei erased earlier gains to stand 1.4% lower at a one-month low of 28,375.
Mainland China markets will be closed until Thursday for the National Day holiday while South Korean markets are closed on Monday.
MSCI’s broadest gauge of global stocks, ACWI, fell 0.1% to 711.92, not far from Friday’s three-month low of 705.27.
Investor sentiment improved Friday after Merck & Co said an experimental oral antiviral treatment could halve the chances of death or hospitalization for those most at risk of severe COVID-19 infection.
A batch of US economic data released on Friday also showed an increase in consumer spending and accelerated factory activity but also elevated inflation.
Data published on Friday also showed that inflation in the Eurozone reached a 13-year high last month and appears likely to jump higher.
Investors fear global inflation will continue for longer than expected, given persistently high commodity prices and persistent supply disruptions in many parts of the world, despite Fed Chairman Jerome Powell’s insistence that high inflation is temporary.
The US core PCE price index, the Fed’s preferred inflation measure for its flexible 2% target, rose 3.6% in August from a year earlier, its biggest rise in three decades and matching July’s gain.
“Although Powell has stuck to his text that inflation will be temporary, he has recently begun to hedge his comments as well, leading investors to suspect that he is also worried about inflation,” said Norihiro Fujito, chief investment analyst at Mitsubishi UFJ Morgan. Stanley Securities.
Expectations that high inflation could prompt the Federal Reserve to advance its monetary policy tightening schedule boosted US bond yields last week.
But yields are off last week’s multi-month highs as end-of-month buying supports bond prices.
The 10-year US Treasury yield settled at 1.460%, from Tuesday’s three-month high of 1.567%.
The lower US yields also affected the dollar in the currency market. The euro bounced back to $1.1608, from Thursday’s 14-month low of $1.1563.
The US currency fell to 111.00 yen, remaining below a one-and-a-half year high of 112.08 yen.
Oil prices remained high, with Brent crude futures remaining near three-year highs hit late last month, amid expectations that oil-producing nations will steadily increase supplies when they meet on Monday.
Brent crude futures were trading at $78.99 a barrel, down 0.3% in early trade.