Asian stocks stumble as dollar holds firm

HONG KONG, Sept.29 (Reuters) – Asian stocks lost ground on Wednesday and were forecast for their worst quarter since the start of the coronavirus pandemic, concerns over economic growth in China combined with fears of a global slowdown and a strong dollar to push the equities markets lower.

The dollar hit an 18-month high against the yen in Asian hours and was flat over 10 months against other major peers after overnight gains, boosted by a recent rise in US Treasury yields , which also helped scare the US stock markets. .

Doubts reign over the global recovery at a time when the US Federal Reserve is set to cut stimulus and the administration of US President Joe Biden is stuck in controversial debt ceiling negotiations that could lead to a government shutdown. At the same time, China is grappling with an electricity crisis that has impacted economic production there.

The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.84% ​​and was heading for a 9.4% decline for the third quarter, its worst quarterly performance in three first months of 2020, when global markets were disrupted by the first spread of COVID-19.

There were declines in benchmarks in South Korea (.KS11), down 1.3%, Australia (.AXJO) down 1.2%, and Chinese blue chips (.CSI300) which lost 0.6 %%, although Hong Kong (.HSI) resisted the 0.5% uptrend.

Japan’s Nikkei (.N225) lost 2.12% following declines in the United States overnight as the country’s ruling party votes for a new leader who will almost certainly become the next prime minister ahead of the general election expected in a few weeks. Read more

Futures suggested a more risk-friendly mood may return later with US equity futures, S&P 500 e-minis up 0.51%, Euro Stoxx 50 pan-regional futures up 0.36% and FTSE futures trading just above the flat.

One of the factors that sapped the mood in Asia was the worsening electricity crisis in China, which pushed investors out of Chinese stocks vulnerable to plant closures, including chemicals and the steel industry, even as the country’s all-powerful economic planning agency tried to reassure residents and businesses. Read more

The energy issues follow turmoil in China’s real estate sector as investors closely monitor the plight of indebted developer Evergrande and regulatory changes in education and technology, with some observers suggesting authorities wanted to secure the changes as the economic growth was reasonably strong.

“I think the window will close in a month or two as the GDP could surprise on the downside… and there could be some employment issues,” said Alan Wang, portfolio manager, Greater China Equities, at Principal. Global Investors.

“When the government sees these numbers, it can start to change its behavior, or maybe extend some deadlines.”

Shares of Evergrande (3333.HK) rose 10.8% after announcing plans to sell a 9.99 billion yuan ($ 1.5 billion) stake it holds in Shengjing Bank (2066 .HK), but investors are still waiting to see if the cash-strapped developer makes an interest payment due Wednesday on a dollar bond. Read more

ROTATION TOWARDS VALUE

Overnight, the three major U.S. stock indexes slipped nearly 2% or more, with interest rate-sensitive tech stocks and tech-adjacent stocks the most affected by the surge in bond yields, as investors began to turn to value stocks.

Benchmark 10-year rates gained 25 basis points in five sessions, but edged down in Asian hours to 1.5392%, after hitting their highest since mid-June the previous day

“We think the 10-year Treasury yields are likely to be around 1.5% to 1.75%, so they obviously still have room,” said Daniel Lam, senior cross-asset strategist at Standard Chartered.

Lam said the rise in yields was due to the United States almost certainly going to start cutting back on massive asset purchases by the end of this year.

Oil prices fell after hitting an almost three-year high the day before. Brent crude fell 1.8% to $ 77.67 per barrel US crude fell 1.75% to $ 73.97 per barrel.

Gold edged up with the spot price at $ 1,739.5 an ounce, up 0.4% from the seven-week low reached the previous day as higher yields hurt demand for the non-interest bearing asset.

Editing by Jacqueline Wong and Lincoln Feast

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