China and rising US bond yields send Asia's markets sliding to nine-month lows

Company News

by Glenn Dyer

On Thursday, China's economic concerns and the surge in US bond yields triggered a slide in markets across Asia, pushing some to their lowest points in nine months.

The ongoing decline of Wall Street and the significant increase in US bond yields collided with escalating worries about China's economy, its struggling real estate sector, and newfound concerns about the stability of the nation's shadow banking system. Reuters reported that MSCI's comprehensive index of Asia-Pacific shares outside Japan dropped to 495.03, reaching its lowest level since November 29.

As of the latest data, the index had fallen by 1.14% to 497.11, marking an 8% decline for the month of August, with half of the month still remaining.

Early trading on Thursday witnessed Japan's Nikkei and Australia's S&P/ASX 200 index plummet by 1%. Meanwhile, China's blue-chip CSI 300 Index dropped by 0.45%, and Hong Kong's Hang Seng Index experienced a 1.7% decrease, nearly reaching its lowest point in nine months.

However, as the trading session progressed, sentiment began to shift slightly. The ASX 200 declined by over 40 points, approximately 0.6%, just before 2pm. The Nikkei in Tokyo also improved, with a decrease of only half a percent, while the Hang Seng in Hong Kong dropped by 0.3%. Additionally, the Shanghai market initially exhibited weakness but later entered positive territory. The CSI 300 index saw a decrease of less than half a point.

Chinese shares weakened due to concerns about the economy's health, exacerbated by growing worries about the struggling property sector. Major players like Country Garden faced uncertainties. Financial stocks were also impacted by fears of potential missed payments by peripheral asset managers.

Adding to the turmoil was the government's ineffective and confused response. News emerged that a crucial statistic—unemployment among young individuals—had been halted due to its soaring levels, causing embarrassment.

"Investors seeking more aggressive support from policymakers amid sluggish activity have been disappointed, as recent incremental measures have not proven sufficient to restore confidence," noted Taylor Nugent, an economist at NAB, in conversation with Reuters.

In the United States, fears of another interest rate hike by the Federal Reserve next month continued to dominate discussions, fueled by robust retail sales figures for July that shook investor confidence.

US 10-year bond yields surged to 4.288%, the highest since October 21, inching closer to a 16-year peak of 4.338% for the security. Yields on two-year bonds had already surpassed 5% earlier in the week before slightly retreating from that level.

The rising yields had the effect of bolstering the US dollar. The dollar index, which gauges the US currency against six counterparts, reached a two-month zenith of 103.58, as investors sought a safe haven.

Simultaneously, the Japanese yen weakened by 0.07% to 146.42 per dollar, marking a new nine-month low. The Australian dollar also dropped below 64 US cents, trading around 63.80.

Commodities were not immune to the impact of surging yields and a stronger greenback. US oil prices witnessed their fourth consecutive decline, with US crude falling by 0.34% to $79.11 per barrel and Brent reaching $83.23, down 0.26% for the day. Comex gold hovered around $1,922 per ounce, shedding over $6 during the session.

In Singapore, the price of 62% Fe fines from Australia traded above $101 per tonne on Thursday.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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