Asian shares slide further, US dollar remains strong

Asian shares slide further, US dollar remains strong

Asian shares fell on Friday, dragged down by losses in China and extending the sharp falls a day earlier while The US dollar rose to a nine-month high today amid fears of slowing growth and a potential easing in U.S. stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.75%, with Chinese blue chips down 1.22% and Hong Kong down 0.53%.

Japan’s Nikkei fell 0.53%, and US stock futures, the S&P 500 e-minis, were down 0.26%.

A day earlier Asian and European stock markets and oil fell sharply and the US dollar rose to a nine-month high, after the prospect of the Federal Reserve cutting back bond purchases spooked investors.

This also sent the US dollar to its highest level since early November, gains which it held onto on Friday.

The dollar index, which measures the currency against six rivals, was little changed from the previous day at 93.517 on Friday.

The US Federal Reserve will hold its annual research conference in Jackson Hole, Wyoming, next week. Fed Chair Jerome Powell is due to give a speech that will be scoured for clues on the central bank’s next steps.

On Friday, traders are also waiting to assess Chinese policy makers’ thinking, as the country will set its benchmark lending rate.

China is expected to keep the rate unchanged for the 16th straight month, but some traders and analysts believe a cut may be needed soon amid signs the country’s economic recovery is losing steam.

China Evergrande Group bucked the declines in China and rose 1.8% even after China’s central bank said it had summoned executives of the country’s most indebted property developer, China Evergrande Group, to talk and issued a warning that the company needs to resolve its debt issues without destabilizing the property and financial markets.

Stocks ended mixed on Wall Street. The Dow Jones Industrial Average fell 0.19%, while the S&P 500 climbed 0.13% and the Nasdaq Composite added 0.11%.

Oil prices continued to fall. US crude dipped 2.57% to US$63.78 a barrel. Brent crude was flat at US$66.42.

US Treasury yields were fairly quiet in Asian hours. The yield on benchmark 10-year Treasury notes was last 1.24367% compared with its US close of 1.242% on Thursday.

Damon Harrison
Market Analyst, IPG Group